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