LONDON, June 15 (Reuters) - Russian stocks led losses on emerging markets on Thursday, hitting 15-month lows and heading for a third day of losses as risks grew of expanded U.S. sanctions and oil prices tumbled amid worries over U.S. and world economic growth.
MSCI’s emerging equity index fell 0.8 percent snapping a two-day winning streak as oil prices touched seven-month lows and a strong inventory build-up cast doubt on the strength of the global economy.
These fears were underscored by weak U.S. retail and inflation data, despite the U.S. Federal Reserve’s decision to raise interest rates for the second time in three months and start unwinding its bond purchases.
The emerging market losses were led by Russia where stocks tumbled almost 2 percent, after U.S. lawmakers voted in favour of new sanctions punishing Russia for meddling in 2016 U.S. elections and making it harder to ease existing curbs.
“Russian stocks are responding to the bill passed by the U.S. Senate last night which would tighten the sanctions regime if signed into law,” William Jackson at Capital Economics said, noting also the relatively strong rouble which was weighing on exporters’ shares.
“Early signs are that (the bill) won’t have a very big macroeconomic impact, but ... as far as there were any hopes that sanctions might be eased or lifted gradually under the Trump administration, that is not going to happen.”
The rouble hovered near one-month highs while Russian sovereign dollar bond yield premiums to U.S. Treasuries were flat at two-month highs.
Most other emerging assets retreated, with Hong Kong shares at a three-week low after local authorities followed the Fed in raising rates. Mainland Chinese shares also weakened .
Gulf central banks also hiked rates following the Fed move, pushing down most local bourses, though sanctions-hit Qatar is yet to do so. Qatari stocks were up slightly but on track for a fifth week of losses.
The Turkish lira pulled off six-month highs before a central bank meeting that should make no changes to the late liquidity lending rate used by the bank.
The lira has been gaining steadily against a weak dollar, therefore “defence of the currency is no longer a driving force,” Commerzbank analysts wrote. They noted that while inflation remained close to 12 percent, “this argument is not sufficient to trigger a rate hike today”.
In central Europe the Romanian leu tumbled to new 4-1/2-year lows to the euro after the ruling Social Democrats withdrew support for the government led by prime minister Sorin Grindeanu.
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For RUSSIAN market report, see) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg
Morgan Stanley Emrg Mkt Indx 1005.29 -8.40 -0.83 +16.59
Czech Rep 999.06 -1.09 -0.11 +8.40
Poland 2295.99 -6.42 -0.28 +17.87
Hungary 35746.25 -239.57 -0.67 +11.70
Romania 8447.46 -29.66 -0.35 +19.23
Greece 796.79 -4.18 -0.52 +23.79
Russia 982.63 -31.15 -3.07 -14.73
South Africa 44620.32 -464.54 -1.03 +1.64
Turkey 98613.92 -1022.35 -1.03 +26.20
China 3132.67 +1.99 +0.06 +0.94
India 31028.07 -127.84 -0.41 +16.53
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 26.17 26.15 -0.07 +3.19
Poland 4.20 4.20 -0.14 +4.80
Hungary 306.57 305.60 -0.32 +0.73
Romania 4.58 4.57 -0.18 -1.04
Serbia 122.11 122.20 +0.07 +1.02
Russia 57.41 57.38 -0.06 +6.71
Kazakhstan 317.85 316.48 -0.43 +4.97
Ukraine 26.00 26.01 +0.02 +3.85
South Africa 12.74 12.63 -0.91 +7.76
Kenya 103.35 103.35 -0.00 -0.95
#VALUE! Turkey 3.50 3.49 -0.43 +0.70
China 6.80 6.79 -0.13 +2.14
Debt Index Strip Spd Chg %Rtn Index
Sov‘gn Debt EMBIG 321 0 .01 7 92.07 1
All data taken from Reuters at 09:13 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT. (Additional reporting by Claire Milhench; Editing by Catherine Evans)