| LONDON, March 27
LONDON, March 27 Emerging equities were
pressured on Monday by growing concern for so-called
Trumpflation trades, although the dollar's retreat to four-month
lows allowed currencies such as the rand and rupee to scale
MSCI's emerging equities flatlined, standing about 1.2
percent off recent two-year highs, as U.S. President
Donald Trump's failure to get support from his own party over
repealing Obamacare raised doubts about his ability to implement
tax cut pledges which have been dubbed Trumpflation.
Sovereign dollar bond yield spreads over Treasuries widened
4 basis points to a one-week high.
But emerging markets received support from the 0.5 percent
fall in the U.S. dollar index and lower Treasury yields,
while buoyant profits at Chinese manufacturers also offered
reassurance on the health of the world's second largest economy.
"To some extent there is concern about the reflation trade
but actually the pause in reflation had started a few weeks
ago," UBS strategist Manik Narain said, pointing to a recent
retreat in cyclical shares as an example.
"A lot now comes down to China and if they can take over the
leadership of the global reflation trade."
He said that continued signs of disinflation were making for
"a sweet spot for emerging local currency debt" and would likely
ensure continued inflows to the sector.
The rand firmed more than 0.5 percent to new 20-month highs
against the dollar while benchmark bond yields slipped to
the lowest since October 2015. The currency also
received support from firmer gold prices, robust economic data
at home and from China, its main export market.
The central bank should keep interest rates steady this
Thursday, though bond markets which are pricing a 25 bps cut by
end-2017, will likely focus on the tone of the post-meeting
statement Goldman Sachs analysts told clients.
"The more benign inflation outlook and recent strengthening
of the rand are likely to cause the MPC to soften its tone at
its meeting this week...our benign outlook for inflation and
dovish rate forecast are likely to continue to support.. the
long end of the yield curve," they added.
Russian 10-year yields touched one-week highs
after the central bank accompanied a 25 bps rate cut on Friday
with some hawkish signals. A dip in oil prices pulled the rouble
off five-week highs.
Earlier in the day, the Taiwan dollar surged to a 2-/2-year
high while the Indian rupee, South Korean won and Thai
baht hit multi-month highs
South Korean stocks however were hit by worries over a
diplomatic standoff with China, with Hyundai Motor
shares down 1.2 percent after it said production was suspended
at one of its Chinese factories for a week.
For GRAPHIC on emerging market FX performance 2017, see tmsnrt.rs/2e7eoml
For GRAPHIC on MSCI emerging index performance 2017, see tmsnrt.rs/2dZbdP5
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see)
Emerging Markets Prices from Reuters
Equities Latest Net Chg % Chg % Chg
Emrg Mkt Indx 968.24 -0.89 -0.09 +12.29
Czech Rep 979.30 -3.23 -0.33 +6.26
Poland 2206.19 -28.63 -1.28 +13.26
Hungary 31983.51 -113.58 -0.35 -0.06
Romania 7966.11 -14.90 -0.19 +12.44
Greece 644.44 +8.78 +1.38 +0.12
Russia 1112.22 -12.44 -1.11 -3.48
South Africa 44244.57 -418.03 -0.94 +0.78
Turkey 90072.24 -310.47 -0.34 +15.27
China 3266.82 -2.62 -0.08 +5.26
India 29225.26 -196.14 -0.67 +9.76
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 27.02 27.02 -0.00 -0.04
Poland 4.26 4.26 -0.02 +3.34
Hungary 309.81 310.07 +0.08 -0.32
Romania 4.55 4.55 -0.01 -0.31
Serbia 123.87 123.85 -0.02 -0.42
Russia 56.81 56.94 +0.23 +7.83
Kazakhstan 315.86 316.96 +0.35 +5.63
Ukraine 27.14 27.10 -0.15 -0.52
South Africa 12.35 12.42 +0.61 +11.19
Kenya 102.72 102.80 +0.08 -0.34
Israel 3.62 3.63 +0.39 +6.48
Turkey 3.60 3.61 +0.33 -1.98
China 6.88 6.88 +0.07 +0.98
India 65.08 65.40 +0.49 +4.40
Brazil 3.11 3.11 -0.01 +4.69
Mexico 18.78 18.75 -0.17 +10.29
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 331 3 .07 7 69.31 1
All data taken from Reuters at 08:41 GMT.
Currency percent change calculated from the daily U.S.
(Editing by Keith Weir)