* Emerging stocks drop 1 pct, debt spreads flat
* Indian stocks fall after major rate hike
* Ivory Coast bond at 5-mth high after finmin letter
By Carolyn Cohn
LONDON, May 3 Emerging stocks dropped 1 percent
on Tuesday as falling commodity pricesand inflation concerns
outweighed buoyancy on the death of Osama bin Laden, with a
large Indian rate hike depressing Indian equities.
The dollar trimmed initial gains but commodity-producing
markets came under pressure from a fall in energy and raw
materials prices, as bin Laden's death was initially seen
lessening Middle East security risks.
"We saw a move up yesterday when there was a knee-jerk
reaction to the death of bin Laden, then realisation set in that
it didn't really have a meaningful effect on the economic
backdrop, so the U.S. market came off and emerging stocks are
following that," said John Lomax, head of emerging equity
strategy at HSBC.
The prospect of continued low U.S. interest rates has been
providing support for higher-yielding emerging markets, but
inflation is a concern in many of these economies.
Indian stocks .BSESN dropped nearly 2 percent, bringing
losses for the year to 9 percent, after the country's central
bank raised rates by a larger than expected 50 basis points to
Russian stocks .IRTS hit their lowest in nearly two weeks
after the central bank raised key interest rates by 25 basis
points on Friday, though the rouble RUB= strengthened.
"India and Russia are the two markets where inflation is
underestimated but for many markets it's been adequately
discounted in the prices," said Lomax.
The MSCI emerging equities index .MSCIEF fell 1 percent to
a 13-day low, off recent June 2008 highs, and the Thomson
Reuters emerging Europe index .TRXFLDEEPU fell 0.75 percent,
retreating from recent multi-year highs.
Emerging sovereign debt spreads 11EMJ edged in by 1 basis
point to 273 bps over U.S. Treasuries.
Emerging market currencies were generally weaker, though the
Polish zloty EURPLN= briefly hit its highest in over two
months against the euro, with local markets shut for a holiday.
Ivory Coast's defaulted $2.3 billion bond edged up to fresh
five-month highs after finance minister Charles Koffi Diby said
last week the country wanted more time to pay an outstanding $29
The finance minister's letter, issued via the Emerging
Markets Traders' Association, was the first statement on the
bond from the government of new president Alassane Ouattara.
"The mere fact that there was communication from the new
government is being viewed as a positive," a bond trader in
The bond XS0496488395=R rose 1.01 points in price to 56.4
cents on the dollar, while the yield dropped 0.2 percent to
11.38 percent, Thomson Reuters data showed.
(Additional reporting by Sujata Rao; Editing by John