Russian markets closed again Thursday

MOSCOW -- Russia ordered its main stock exchanges closed for a second day Thursday as President Dmitry Medvedev said 500 billion rubles ($20 billion) will be poured 0into financial markets in an effort to stabilize them.

The government is struggling to stem a dizzying plummet in share prices and restore confidence in the economy — trouble that has revived memories of the 1998 financial collapse. The financial regulator first suspended trading on Wednesday after the RTS, a leading index, fell 6.5% and the MICEX exchange, where the bulk of trading in Russian stocks takes place, fell 3%.

"We have sufficient reserves and a strong economy and this guarantees the avoidance of any shocks," Medvedev said in televised comments.

"There is no more important task for Russian authorities than supporting the stability of our financial system under the current circumstances. This is our top priority," he said. "The market should be given all the necessary support."

To that end, about 500 billion rubles will be injected into the financial sector, from the state budget and other sources, he said.

The MICEX exchange is now at its lowest level in nearly three years in the wake of sliding oil prices and turmoil on Wall Street.

Trading in less important financial instruments, like "repo" contracts, futures and bond repurchases, was being allowed on both MICEX and RTS.

Meanwhile, Russian banks are facing a tightening squeeze on liquidity — accelerated by a breakdown in confidence between lenders.

"Everybody's sitting on a lot of cash, but nobody wants to lend it to anybody else," said Hawk Sunshine, head of investment banking at Metropol investment bank.

The Kremlin has struggled to restore confidence in the banking system with a wave of emergency loans, fearing a repeat of the 1998 economic crisis, which saw the ruble devalued, default on the country's sovereign debt and widespread bank foreclosures.

Russia's situation is markedly different now — the government has huge cash reserves and virtually no debt. But analysts still warn that disaster could loom if officials mishandle the problems.