LONDON Dec 13 A pause in the rally in U.S. bond
yields ahead of December's Federal Reserve meeting and
stronger-than-expected Chinese data lifted emerging market
equities on Tuesday, although Russian assets eased off the highs
hit earlier this week.
U.S. Treasury yields hit a two-year high on
Monday, spiking on expectations that president-elect Donald
Trump will pursue expansionary fiscal policies that will drive
growth and inflation.
This steepening of the U.S. yield curve has created
headwinds for emerging market assets, but selloff has paused
before the Fed starts its two-day meeting that will almost
certainly raise interest rates by 0.25 percent -- its first
increase in 2016
This allowed the benchmark emerging stocks index
to rise 0.3 percent, with strong gains in emerging Europe and
selective Asian markets.
Some of the equity outperformers included Poland,
up around 1 percent, Turkey, up 0.7 percent to
one-month highs and South Korea, up 0.4 percent to
"Emerging market stocks are taking some comfort in the fact
that the selloff in U.S. bond markets that caused yields to rise
quite significantly - normally a negative for emerging markets -
is showing signs of stabilisation ahead of the Fed meeting,"
said Jakob Christensen, head of emerging markets research at
But Christensen said markets wanted to see what the Fed
makes of Trump's planned stimulus and higher commodity prices,
especially after oil's surge to 18-month highs following OPEC's
deal with some other producers to cut output.
"It's very important to see what the Fed communicates, and
whether they are more hawkish in that light," he said, noting
that the market had priced in two hikes next year.
The yield premium paid by emerging sovereign dollar debt
over U.S. Treasuries on the JPMorgan EMBI Global Diversified
index was one basis point wider at 346 basis points
(bps), but close to one-month lows of 343 bps hit on Friday.
Investor sentiment towards emerging markets was also boosted
by better-than-expected Chinese factory output and retail sales
data for November.
Chinese mainland shares ended up a touch, struggling
off a one-month low hit on Monday. The yuan
also firmed against the dollar after the central bank
set the midpoint rate firmer than the previous fix.
But other currencies failed to make headway with the Russian
rouble slipping slightly percent against the dollar
after leaping 2.4 percent on Monday to its strongest in over a
The rouble has been supported by the oil rebound, which has
also helped Moscow shares to record highs. Russian stocks
were down 0.4 percent on Monday.
The rouble has now overtaken the Brazilian real as the best
emerging currency performer of 2016 and is widely expected to
appreciate further. tmsnrt.rs/2e7eoml
"The rouble remains an attractive currency...due to the
prospect of relatively stable oil prices, a high interest rate
differential, improvement in economic activity and stability in
domestic politics at a time when Europe faces major political
risk events in 2017," Rabobank told clients.
The Kazakhstan tenge was also down 0.4 percent and
the South African rand slipped 0.2 percent.
The Romanian leu weakened 0.3 percent against the
euro but Bucharest stocks rose 0.4 percent, following a
victory for the leftist Social Democrats in a parliamentary
election on Sunday.
The Azerbaijan manat was 0.1 pct weaker, not far off
record lows, after the central bank unveiled plans on Monday to
fully float the currency in 2017. It currently operates a
managed float regime.
For GRAPHIC on MSCI emerging index performance 2016, 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 875.10 +2.86 +0.33 +10.19
Czech Rep 909.01 +3.58 +0.40 -4.95
Poland 1906.62 +24.04 +1.28 +2.55
Hungary 30768.12 +154.97 +0.51 +28.63
Romania 6981.91 +27.82 +0.40 -0.32
Greece 636.64 -3.74 -0.58 +0.84
Russia 1145.73 -2.86 -0.25 +51.34
South Africa 43950.21 +57.70 +0.13 -4.03
Turkey 76857.43 +617.80 +0.81 +7.15
China 3155.36 +2.39 +0.08 -10.84
India 26700.57 +185.33 +0.70 +2.23
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 27.01 27.02 +0.03 -0.04
Poland 4.45 4.45 -0.06 -4.33
Hungary 314.08 314.23 +0.05 +0.18
Romania 4.50 4.49 -0.24 +0.32
Serbia 123.28 123.42 +0.11 -1.47
Russia 61.02 60.97 -0.08 +19.56
Kazakhstan 331.30 330.10 -0.36 +2.78
Ukraine 26.08 26.05 -0.12 -8.16
South Africa 13.61 13.60 -0.07 +13.60
Kenya 101.90 101.90 +0.00 +0.29
Israel 3.80 3.81 +0.20 +2.24
Turkey 3.47 3.47 +0.01 -15.88
China 6.90 6.90 +0.04 -5.94
India 67.49 67.42 -0.10 -1.91
Brazil 3.34 3.34 +0.00 +18.61
Mexico 20.23 20.20 -0.14 -15.13
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 372 1 .03 7 32.45 1
(Editing by Keith Weir)