| LONDON, April 7
LONDON, April 7 Russian assets led emerging
stocks and currencies lower on Friday as a U.S. missile strike
in Syria spooked investors wary about risks of a clash with
Russia, while emerging equities fell to three-week lows but
still look to end the week in the black.
MSCI's benchmark emerging equities index was down
0.2 percent, mirroring a broad sell-off in riskier assets after
the United States fired 59 cruise missiles at a Syrian air base
from which it said a deadly chemical weapons attack was carried
out earlier this week.
Russia said the missile strike broke international law and
had seriously damaged U.S.-Russian relations.
The rouble was down around one percent against the
dollar and Russian dollar-denominated stocks fell 2.4
percent. The currency was also undermined by comments from the
Russian economy minister suggesting the rouble could weaken in
"The current price action makes sense," said ING chief EMEA
FX and rates strategist Petr Krpata. "The geopolitics in the
region is not positive for the currency so what we see is a
knee-jerk reaction. But unless these things are followed up and
there is a further escalation, they do not usually last."
The average yield spread of Russian sovereign bonds
over U.S. Treasuries on the JPMorgan EMBI Global
Diversified widened out by 7 basis points (bps) to 167
bps. Russian 10-year bond yields also rose 10 basis points to
7.95 percent, bouncing off three-year lows.
Russian five-year credit default swaps also rose 5 bps from
Thursday's close to 167 bps.
Other emerging assets to feel the heat included the Turkish
lira, which weakened 0.3 percent, and Turkish stocks
, which fell 0.2 percent. Turkey lent its support to the
U.S. missile strike.
South African assets also remained under pressure following
a ratings downgrade to junk amidst ongoing political turmoil.
Thousands were expected to protest against President Jacob
Zuma in major South African cities on Friday demanding that he
resign. Zuma's sacking of respected finance minister Pravin
Gordhan outraged allies and opponents alike.
Stocks fell 0.8 percent and the rand was set
to end the week down 2.3 percent, although it steadied on
Friday. Moody's has pushed back a ratings review that was
expected to happen later on Friday.
Investors were also wary ahead of U.S. non-farm payrolls
data due later today, as a strong number could bolster
expectations of as many as three more Fed rate hikes this year.
"We are not far from two hikes, but we need to get some
really good data or some big moves from Trump on tax cuts for
example for the market to start pricing in more Fed hikes
again," said Krpata.
China's yuan was a touch weaker against the dollar as
U.S. President Donald Trump and Chinese President Xi Jinping
began their summit, at which trade and security issues are
likely to feature heavily.
China's foreign exchange reserves rose slightly in March and
remained above $3 trillion, as capital control measures and a
pause in the dollar's rally helped contain capital outflows.
Trump is thought unlikely to formally declare China
a currency manipulator next week.
The Czech crown was steady at 26.62 per euro after
jumping 1.7 percent on Thursday when the central bank removed
the currency cap.
Investors had bet heavily on the exit, prompting the central
bank to buy an estimated 70 billion euros since 2013 to defend
the cap, with more than half of that coming in the past three
The 2020 and 2021 dollar-denominated bonds of Venezuela's
state oil company PDVSA were trading up over 1 cent
in the dollar after it started bank transfers to make its first
April bond payments. Venezuela's sovereign 2026 and 2038 issues
were also up 1-1.7 cents.
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 961.23 -2.06 -0.21 +11.48
Czech Rep 981.31 +1.34 +0.14 +6.48
Poland 2242.25 -12.22 -0.54 +15.11
Hungary 32510.32 -43.21 -0.13 +1.59
Romania 8199.54 +17.87 +0.22 +15.73
Greece 674.13 +2.98 +0.44 +4.74
Russia 1121.05 -27.70 -2.41 -2.71
South Africa 45801.43 -368.67 -0.80 +4.33
Turkey 88588.25 -90.79 -0.10 +13.37
China 3287.02 +6.02 +0.18 +5.91
India 29874.33 -53.01 -0.18 +12.20
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 26.62 26.61 -0.04 +1.46
Poland 4.23 4.23 +0.18 +4.21
Hungary 310.28 310.60 +0.10 -0.47
Romania 4.52 4.52 -0.02 +0.29
Serbia 123.84 123.75 -0.07 -0.40
Russia 56.90 56.37 -0.93 +7.66
Kazakhstan 313.19 312.68 -0.16 +6.53
Ukraine 26.94 27.01 +0.26 +0.22
South Africa 13.73 13.75 +0.15 +0.01
Kenya 103.30 103.30 +0.00 -0.90
Israel 3.65 3.64 -0.20 +5.44
Turkey 3.72 3.71 -0.33 -5.25
China 6.90 6.90 -0.06 +0.63
India 64.32 64.60 +0.44 +5.64
Brazil 3.14 3.14 -0.02 +3.52
Mexico 18.74 18.73 -0.05 +10.52
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 332 1 .03 7 70.91 1
(Additional reporting by Marc Jones; editing by Mark Heinrich)