Emerging markets climb on news from US

LONDON: Emerging stocks hit threemonth highs yesterday on expectations that the US Federal Reserve may withdraw its stimulus slower than previously thought, while Turkish assets were buoyed by hopes for a diplomatic solution to the Syria crisis.

Lawrence Summers withdrew on Sunday as a candidate to take over as Fed chairman from next year, with new leading candidate Janet Yellen seen as less hawkish. That hit the dol- lar and boosted risky assets before the Fed’s policy meeting this week.

While the news on Summers has little bearing on the meeting at which the Fed is expected to start reining in its bond-buying, it was seen as a dovish signal for the likely scale of support in 2014 for the US.

“This is a make-or-break week for global emerging markets, and the near-term outlook will primarily be determined by the policy signal sent by the Fed this week,” Société Générale analysts said.

Oil hit three-week lows, helping energy importers such as Turkey, after US Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov agreed on Saturday to back a UN programme to destroy Syria’s chemical weapons arsenal.

The MSCI emerging equities index rose to its highest since early June. South African stocks hit record highs before trimming gains.

Emerging stocks sank nearly 20 percent in less than two months on concern about Fed tapering, but have retraced two-thirds of those losses since June. But with 2013 losses of 5 percent, they have significantly underperformed developed peers.

Stocks in Turkey rose 2.5 percent to four-week highs, while the lira rose 1.4 percent to three- week highs, according to Markit. – Reuters