Benzinga | Aug 13, 2020 09:25AM EDT

This Day In Market History: Russian Stocks Drop 6% On Government Insolvency Fears

Each day, Benzinga takes a look back at a notable market-related moment that occurred on this date.

What Happened? On this day in 1998, the Russian stock market crashed 6% on fears that the Russian government would default.

Where The Market Was The Dow Jones Industrial Average closed at 8,459.50 and the S&P 500 traded at 1,074.91.

What Else Was Going On In The World? In 1998, the European Union agreed to use a single central currency, the euro. U.S. President Bill Clinton was impeached for perjury and obstruction of justice. The average U.S. income was $38,100.

Russian Economy On Brink Of Disaster What was once thought to be a localized currency crisis in Thailand in mid-1997 spread to other Asian nations across the following year, reaching South Korea, Hong Kong and China by the end of 1997. By 1998, the problems had spread to the economies of Russia and Brazil.

On Aug. 13, 1998, the Russian stock market plummeted 6%, bringing year-to-date losses up to an incredible 75%. Short-term interest rates spiked to an astronomically high 200% during the panic as investors began to seriously doubt the Russian government's solvency.

After an emergency session of parliament the next day, Russian President Boris Yeltsin announced said "there will be no devaluation" of the ruble. Three days later, on Aug. 17, 1998, Russia announced a devaluation of the ruble and a 90-day moratorium on foreign debt repayment.