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Global markets seen sanguine on Yeltsin's exit

LONDON: Russian President Boris Yeltsin's unexpected resignation should leave global financial markets largely unmoved, though U.S. Treasuries and the dollar may benefit from a marginal flight to safety, analysts said on Friday.

Yeltsin stepped down on Friday, the eve of the millennium, naming his protege Prime Minister Vladimir Putin as acting president and moving presidential elections three months forward to March.

The euro was rangebound in thin holiday trading while S&P 500 index futures trading on Globex pointed to small gains when U.S. stock markets open at 1430 GMT.

Analysts said that Yeltsin's exit was already well discounted and that global markets had proved largely immune to developments in Russia's volatile politics and economy.

"I'm not expecting any big panic," said Graham McDevitt, head of fixed income strategy at ABN Amro. "The knee jerk reaction is that it could give the markets some excuse to take some profits and an excuse to stay long on the dollar.

"Yeltsin's death or his stepping down has been on the cards for a long time. Yeltsin stepping down is probably the better result, it is more organised and orderly."

For emerging markets, Russia in particular, the news may well be taken positively, analysts said.

Russian shares rose sharply on the news, jumping more than 16 percent in light trading.

"Essentially, this just endorses what was positive about the (parliamentary) election result and takes away a degree of uncertainty," said Philip Ehrmann, head of global emerging markets at fund managers Gartmore in London, referring to gains made by Russia's centre right in polls earlier this month.

But overall in larger markets, effects will be muted, analysts said.

"The importance of the Russian economy and military is far less than it used to be," said Gerard Lyons, head of global treasury research at Standard Chartered in London.

Lyons said that any buying of U.S. securities in a flight to safety was likely to be far less than in similar Russian shocks in years past.

"Putin has in recent months been seen as the heir apparent and this should remove all the uncertainty over Yeltsin's health and should result in some stability at the top of the Russian miliatry system," he said.

Y2K FEARS AND CHECHNYA STILL WILDCARD

Analysts said that Yeltsin's departure would likely serve as only a sidebar to the main event going into 2000: the world's ability to hurdle potential Y2K computer problems.

Financial markets, when they reopen in earnest next week, will largely react to how well computer systems cope, they said.

If anything, investors will now be more nervous about Russia's ability to handle Y2K, some analysts said.

"Some might see his stepping down on December 31 as more than a coincidence," said Lyons.

Putin's handling of Russia's conflict in Chechnya will also come under the microscope and might potentially move markets, but this will have no immediate effect.

"It is all change but no change in a way because I think Putin is not going to represent a change in the old order," said David Brown, chief European economist at Bear Stearns in London.

"If anything, Yeltsin's departure has been pretty much discounted by virtue of his chronicle of illness. I do not think its is going to be seen as such a great shock."-Reuters