The meltdown in Russian financial markets has reached the terminal phase.

Thus begins a letter by

George Soros

in today's

Financial Times

, and thus begins the day on Wall Street.

Soros' dire predictions and the

news yesterday that Russia had imposed controls on trading the ruble rocked the currency and equity markets this morning. Dollar/yen rocketed to 147.10 on the news and has since slipped to 145.05 -- 1.14 below yesterday's close. Similarly, dollar/mark climbed above 1.80 before dropping to 1.79. Stocks on the

Russian Trading System

were halted after the RTS Index slipped 11%. Calls for calm from Prime Minister

Sergei Kiriyenko

, who told reporters that "there are no grounds for a deterioration in the situation of the markets," have helped quiet things down -- the RTS was lately down 9.74, or 9%, at 98.45 -- but a risk that the

Financial Times

itself pointed to remains. "There is a danger of George Soros' doom-mongering proving self-fulfilling," said the paper in its influential Lex column. "Comments that Russia's perilous financial condition has reached the 'terminal phase' will hardly allay the fears of a default or a money-printing splurge."

As is so often the case, it appears that the devil the market had been worrying about was not the devil that was at its door.

"The market has been so focused on a Chinese devaluation this Russia thing came out of the blue," said Marc Chandler, currency strategist at

Deutsche Bank

and contributor to

TheStreet.com

. "It's unfortunate. But the market's reaction is not what we would have expected intuitively. Gold at seven-year lows. The dollar soars and then falls hard -- harder than it rallied. It's the kind of market that's safest to stay away from."

Judging how U.S. stocks will react to the news is difficult -- though it looks like they will open down, the

S&P 500

futures have been volatile through the morning. At 9 a.m. EDT, they were off 3.2, 1.2 below fair value, but significantly up from their lows.

The trouble in Russia ensured that July

retail sales

would be a virtual nonevent for the bond market. The overall figure came in at a decline of 0.4%; excluding the

General Motors

(GM) - Get Report

-strike-affected auto sector, sales increased 0.5%. Expectations were for the headline number to come in down 0.8%, with a 0.4% increase ex-autos. The long bond was down 12/32 to 107, lifting the yield to 5.63%.

After eight days of losses, Japanese stocks posted slight gains. The

Nikkei

climbed 3.05 to 15,382.02. With many investors off for Obon week, trading was light.

For the rest of the world's major markets, the screens were red. In Hong Kong, the

Hang Seng

dropped 199.06 to 6,660.42, as word of Russia's currency woes sparked renewed fears of a Hong Kong dollar devaluation.

In Germany, where bank exposures to Russia are high, stocks were taking the brunt of it. The

Dax

was off 75.05, or 1.4%, to 5327.31. In Paris the

CAC

was off 8.40 at 3927.29, while in London the

FTSE

was off 60.4, or 1.1%, to 5401.8.

Thursday's Wake-Up Watchlist

By

Brian Louis
Staff Reporter

British Telecommunications

(BTY)

24.9% stake in their Concert Communications venture for $1 billion,

The Wall Street Journal

reported. British Telecommunications two years ago bid to buy MCI but was trumped by

WorldCom

(WCOM)

after reducing its offer.

Merck

(MRK) - Get Report

is in the late stages of human testing of new antidepressant drugs that block a key brain chemical, the

Journal

reported.

Kmart

(KM)

today reported second-quarter net income of $80 million, or 16 cents basic earnings per share, including a nonrecurring charge of $19 million relating to a voluntary early retirement program in the company's distribution centers. The earnings are 1 cent below

First Call's

16-analyst estimate of 17 cents per share. Before the charge, net income was $93 million for the quarter, an increase of 200 percent.

Navistar

(NAV) - Get Report

today announced that net income for the third quarter totaled $50 million, or 72 cents per diluted common share, compared with 1997 third-quarter net income of $35 million, or 38 cents per diluted common share. First Call's six-analyst estimate called for earnings of 67 cents.

Comcast

(CMCSK)

reported a second quarter per share loss of 25 cents, matching First Call's 11-analyst estimate.

Cendant

(CD)

said this morning it will lower 1995 results by 14 cents per share.

Merrill Lynch

reiterated its short and long-term buy rating on shares of

News Corp.

(NWS) - Get Report

with an outperform rating and a price target of 40.

Bear Stearns

said it started coverage on

Jacobs Engineering

(JEC) - Get Report

and

Fluor

(FLR) - Get Report

, rating both attractive.

Bear Stearns said it has lowered its rating of

Inland Steel

(IAD)

to attractive from buy.

As originally posted, this story contained an error. Please see Corrections and Clarifications

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