By Claire Milhench
LONDON, April 6 Emerging stocks fell and
currencies weakened on Thursday after minutes from the U.S.
Federal Reserve clobbered risk appetite, while investors
monitored a Czech central bank meeting to see if it will abandon
the cap on the crown.
MSCI's benchmark equities index fell 0.7 percent,
tracking losses in developed markets with bourses across Asia
and emerging Europe selling off. Hong Kong shares fell
0.6 percent, Polish stocks 0.7 percent and Russian
dollar-denominated stocks 0.5 percent.
Currencies were also mainly on the backfoot with the Russian
rouble retreating from a near 21-month high touched on
Wednesday while the Turkish lira weakened 0.4 percent to
Sentiment soured overnight when minutes from the Fed's last
meeting showed most policymakers thought the U.S. central bank
should begin trimming its $4.5 trillion balance sheet later this
year, much earlier than many had expected.
Disappointing data added to the bearish mood, with activity
in China's services sector expanding at its weakest pace in six
months. The yuan dipped against the dollar
but Chinese shares ended at a four-month high,
bolstered by the government's plans for a new economic zone.
In Europe, the focus was on a Czech central bank meeting to
find out whether policymakers would scrap the cap on the crown,
which prevents the currency from firming past 27 to the euro and
has been in place since November 2013.
Policymakers had pledged to keep the cap in place until the
end of March. According to a Reuters poll, the crown is expected
to gain 5 percent in 12 months.
The crown's implied rate in the one-month forwards
market is trading at 26.9 per euro and in the
three-month forwards market it is 26.7 per euro,
the highest since late 2013.
"It could happen at any time," said Kaan Nazli, senior vice
president at Neuberger Berman. "They have a pretty strong
balance sheet – they are producing current account surpluses -
and if you look at the fundamental value of the crown it has
been strengthening over the time that they have been keeping it
at a weaker point."
The South African rand bucked the trend, firming 0.4
percent after the ruling ANC party rejected calls for President
Jacob Zuma to quit. The rand touched three-month lows on
Tuesday, pressured by political turmoil and a ratings downgrade
A parliamentary motion of no confidence against Zuma has
been scheduled for April 18, but previous no confidence motions
have failed as the ANC has a commanding majority.
"It looks like the ANC is siding with the president but
clearly a lot of people and groups from the wider ANC coalition
are against the president..., which basically means the rest of
the year we will have continued headline risk," said Nazli.
"There might be more rating downgrades down the line; it is
very likely that it could go to junk in three to six months from
now on the external rating."
Bonds remained under pressure, with the average yield spread
of South African sovereign bonds over U.S. Treasuries on the JP
Morgan EMBI Global Diversified index rising 3 basis
points (bps) to 279 bps.
Earlier in Asia, Indian stocks retreated from record
highs ahead of a central bank meeting at which it is expected to
keep rates at 6.25 pct, according to a Reuters poll.
India's services sector continued to recover in March from
the shock demonetisation, expanding at its fastest since
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 962.55 -6.67 -0.69 +11.63
Czech Rep 978.33 -2.45 -0.25 +6.15
Poland 2237.16 -16.48 -0.73 +14.85
Hungary 32400.94 -4.19 -0.01 +1.24
Romania 8215.04 +13.21 +0.16 +15.95
Greece 669.01 -0.96 -0.14 +3.94
Russia 1147.66 -4.83 -0.42 -0.41
South Africa 45843.20 -306.65 -0.66 +4.42
Turkey 88775.35 -262.10 -0.29 +13.61
China 3281.60 +11.29 +0.35 +5.73
India 29874.31 -99.93 -0.33 +12.20
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 27.02 27.03 +0.06 -0.04
Poland 4.24 4.23 -0.11 +3.93
Hungary 310.32 310.21 -0.04 -0.48
Romania 4.52 4.53 +0.09 +0.26
Serbia 123.73 123.75 +0.02 -0.31
Russia 56.40 56.31 -0.15 +8.63
Kazakhstan 312.59 311.66 -0.30 +6.74
Ukraine 27.04 27.04 -0.00 -0.15
South Africa 13.73 13.79 +0.46 +0.00
Kenya 103.15 103.11 -0.04 -0.76
Israel 3.65 3.65 -0.09 +5.54
Turkey 3.71 3.70 -0.39 -4.98
China 6.90 6.89 -0.11 +0.63
India 64.96 64.87 -0.14 +4.59
Brazil 3.12 3.12 -0.06 +4.23
Mexico 18.83 18.81 -0.07 +10.03
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 333 1 .03 7 70.38 1
(Additional reporting by Karin Strohecker)