Big daily gains by emerging markets

EMERGING-MARKET stocks enjoyed their biggest daily gains in nearly four weeks yesterday, although weaker oil prices took a toll on many markets, with Russia’s rouble down half a percent.

MSCI’s emerging equity benchmark rose 0.7 percent, lifted by healthy gains in heavyweights Taiwan and Hong Kong, which jumped about 1 percent, with stocks in mainland China matching those gains thanks to signs of tight liquidity conditions easing.

However, currencies failed to take advantage of a tepid dollar after weaker-than-forecast data on US housing and consumer sentiment on Friday cast doubt on the health of the world’s top economy. This led the greenback to reverse gains made in the wake of the Federal Reserve’s rate hike.

The rouble slipped 0.5 percent against the dollar, trading at its weakest in one month as oil prices slid lower.

The fall in the price of crude prompted Moscow policy-makers on Friday to trim the key interest rate by 25 basis points to 9 percent – less than some of the analysts had expected.

Inflation

Explaining the decision, central bank governor Elvira Nabiullina said annual inflation had neared its long-awaited goal of 4 percent as inflationary expectations of households had fallen to an all-time low in May.

“What was interesting about that meeting, more than the decision itself, was the rhetoric,” Cristian Maggio, the head of emerging markets strategy at TD Securities, said. “The Central Bank of Russia came across more hawkish than what the market had expected.”

The market was in the process of repricing, Maggio said. Before the meeting the expectation was 300 basis points worth of cuts over the year.

Other currencies fared little better, with Mexico’s peso and Israel’s shekel easing 0.3 percent, while Turkey’s lira slipped 0.2 percent.

Currencies across central Europe weakened against the dollar, with the Polish zloty and the Hungarian forint easing 0.2 percent.

Romania’s leu hovered near a more than four-year low. The currency was hit by political upheavals last week. The ruling leftists have filed a no-confidence motion against Prime Minister Sorin Grindeanu.