6 Min Read
LONDON, April 12 (Reuters) - Emerging stocks snapped out of this year's longest losing streak on Wednesday, rising 0.3 percent as a fall in U.S. Treasury yields towards five-month lows offset jitters around Syria and North Korea.
Emerging stocks had fallen for four days in a row amid a standoff between Russia and West over Syria, jitters around French elections and North Korea's nuclear threat.
But some of those trades unravelled, with the South Korean won rising after six sessions in the red, MSCI's emerging market index gaining and the recent Japanese yen rally boosting other Asian currencies.
Even the Turkish lira and the South African rand touched one-week highs despite Turkey heading into a weekend referendum over expanding presidential powers and South Africa being hit by a spate of rating downgrades.
"While headline news suggest a risk-off environment, it is not the ordinary risk-off in the world of FX," ING analysts said, noting the resilience of high-yielding currencies.
"An equally important driver of FX markets seems to be dollar softness due to lower Treasury yields that is partly outweighing concerns about geopolitics."
Investors have also noted the improvement in emerging growth and company earnings. The Institute of International Finance on Tuesday noted emerging economies likely expanded by 4.5 percent in the first quarter, higher than previously forecast.
"Emerging markets have been strengthening from the fundamental case for several months. We made the decision back in September that emerging GDP growth rates ... were re-accelerating, so we thought we were back in a bullish cycle," Bryan Carter, head of emerging debt at BNP Paribas Investment Partners, said.
The Russian rouble was lifted 0.2 percent thanks to higher oil prices, while local stocks also rose.
But markets were eyeing an upcoming news conference by U.S. Secretary of State Rex Tillerson and his Russian counterpart Sergei Lavrov, after the two sides traded accusations over last week's deadly poison gas attack in Syria.
Ten-year bond yields approached one-month highs, standing 20 basis points above recent three-year lows before an auction of 40 billion roubles ($704.16 million) in OFZ bonds.
Russian five-year credit default swaps inched to the highest level since end-March at 173 bps, according to IHS Markit.
The Czech crown was steady around 26.6 per euro, off 3-1/2-year highs hit on Monday after authorities scrapped its 27-per-euro cap. One-month euro-Czech volatility, a gauge of expected currency swings, slipped off recent two-year highs .
Bond markets are focusing on Saudi Arabia's sukuk, expected to be the largest ever Islamic issue. While initial guidance was 20 bps above Saudi's conventional bonds, it is likely to end up almost flat to the curve, players say.
Later on Wednesday, Brazil's central bank may speed up monetary easing. Most of the 47 economists polled by Reuters predicted a 100 bps cut to 11.25 percent and one forecast a 125 bps cut.
Ten-year yields, which recently touched 3-1/2-year lows, are down almost 200 bps this year.
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
Morgan Stanley Emrg Mkt Indx 959.97 +5.53 +0.58 +11.33
Czech Rep 984.47 -8.48 -0.85 +6.82
Poland 2219.46 -2.36 -0.11 +13.94
Hungary 32369.60 +170.45 +0.53 +1.15
Romania 8208.15 +7.97 +0.10 +15.85
Greece 678.73 -1.33 -0.20 +5.45
Russia 1097.76 +6.68 +0.61 -4.74
South Africa 47078.98 +321.44 +0.69 +7.24
Turkey 91165.62 +261.13 +0.29 +16.67
China 3273.83 -15.14 -0.46 +5.48
India 29733.88 -54.47 -0.18 +11.67
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 26.68 26.65 -0.09 +1.23
Poland 4.25 4.25 -0.05 +3.68
Hungary 311.64 311.91 +0.09 -0.90
Romania 4.51 4.51 +0.04 +0.57
Serbia 123.63 123.72 +0.07 -0.23
Russia 56.76 56.90 +0.25 +7.94
Kazakhstan 311.79 311.46 -0.11 +7.01
Ukraine 26.86 26.88 +0.07 +0.52
South Africa 13.76 13.79 +0.20 -0.23
Kenya 103.20 103.40 +0.19 -0.80
Israel 3.65 3.65 -0.01 +5.35
Turkey 3.68 3.70 +0.36 -4.25
China 6.89 6.89 -0.03 +0.75
India 64.61 64.55 -0.10 +5.16
Brazil 3.14 3.14 -0.05 +3.68
Mexico 18.75 18.78 +0.17 +10.49
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 334 0 .06 7 72.12 1
All data taken from Reuters at 08:16 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT. ($1 = 56.8050 roubles) (Additional reporting by Claire Milhench; Editing by Tom Heneghan)