Rus­sian as­sets fall, broader stocks steady near 3-year high

The Financial Daily - - INTERNATIONAL -

LON­DON: Mil­i­tary ten­sions and a wors­en­ing econ­omy put Rus­sian dol­lar-de­nom­i­nated stocks on track on Fri­day for a 4 per­cent loss on the month, buck­ing broader emerg­ing eq­ui­ties that were poised for their sev­enth straight month of gains.

Rus­sia stands ac­cused of send­ing troops into Ukraine to shore up a sep­a­ratist re­bel­lion that had ap­peared to be ebbing. That has sharply es­ca­lated the five-month con­flict over eastern Ukraine and raised the spec­tre of fresh sanc­tions from the West.

"If you look at Rus­sia from a bot­tom-up per­spec­tive, it's gone from bad to worse," Benoit Anne, head of emerg­ing mar­kets strat­egy at So­ci­ete Gen­erale, said, al­though "the cri­sis has strug­gled to take it to the sta­tus of a global mar­kets event."

The rou­ble fell 0.35 per­cent against the dol­lar to touch a fresh record low while dol­lar­de­nom­i­nated Moscow stocks hit a two-week low and were down 0.7 per­cent af­ter Thurs­day's 2 per­cent fall, eye­ing losses for the week of 4 per­cent.

Rus­sian dol­lar bonds too have slipped in price since news of the mil­i­tary in­cur­sion, with yield spreads over US Trea­suries widen­ing 20 ba­sis points over the week.

Rus­sian 10-year rou­ble debt yields rose 11 bps af­ter a 35bps jump on Thurs­day.

Broader emerg­ing mar­kets have re­mained rel­a­tively un­ruf­fled how­ever, with MSCI's emerg­ing eq­uity in­dex trad­ing just off Thurs­day's three-year highs, helped by a rise in Chi­nese stocks and by a fall in safe-haven US 10-year yields.

The emerg­ing stocks in­dex is head­ing for its sev­enth straight month of gains and is up 8.5 per­cent year-to-date. Turk­ish stocks rose 0.7 per­cent to three­week highs, af­ter data show­ing a nar­rower than ex­pected trade deficit in July.

Emerg­ing Euro­pean cur­ren­cies were steady to slightly firmer.

The zloty, seen as a proxy for con­ta­gion to cen­tral Europe from the Ukraine cri­sis, hit five-month lows early on Fri­day. But it trimmed losses fol­low­ing data show­ing growth up a stronger-than-ex­pected 3.3 per­cent year-on-year in the sec­ond quar­ter.

The rand, which Anne said was ben­e­fit­ing from safe haven sta­tus due to its dis­tance from Ukraine, reached an 11-day high.

But South African stocks hit 2-1/2 week lows.-Agen­cies

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