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By Claire Milhench
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LONDON, Sept 28 (Reuters) – Emerging equities edged off one-week lows on Wednesday, tracking a bounce in developed markets, but emerging currencies remained under pressure with the rouble slipping ahead of oil producer talks as hopes faded for a deal to curb output.
The benchmark emerging stocks index rose 0.13 percent after European markets opened stronger helped by a 3 percent rise in Deutsche Bank shares, climbing off a record low.
The bank has been hit by a $14 billion fine over claims that it mis-sold mortgage-backed securities and, like other euro zone lenders, has been squeezed by the European Central Bank’s low interest rates.
The rebound helped ease some of the angst that had dampened investor appetite for riskier assets in Asian trading, which saw Chinese mainland shares down 0.3 percent and Korean stocks down 0.47 percent.
“The European markets may have reassessed and maybe some of the fears about Deutsche Bank have faded,” said William Jackson, senior emerging markets economist at Capital Economics. “More generally, there is a bit of stabilisation after a volatile few days.”
Turkish stocks rose 0.4 percent, Budapest was up 0.6 percent, and Moscow was up 0.4 percent.
Currencies remained under pressure, however, with the Russian rouble one of the biggest fallers.
It weakened 0.5 percent against the dollar as hopes faded that informal talks between oil producers today would find a compromise to ease the global crude glut. The Kazkahstan tenge also slipped 0.2 percent against the dollar.
Iran has already rejected an offer from Saudi Arabia to limit its oil output, reducing the likelihood of a deal being struck.
“The Saudis are quite happy to keep oil prices low to squeeze out high cost producers and it doesn’t want to do anything that will benefit Iran,” said Jackson. “It’s unlikely we will see something that will fundamentally alter the outlook for oil prices.”
Most Middle Eastern stock markets were in the red, with Saudi Arabia down almost 2 percent to touch its lowest level since mid-February.
The Mexican peso also slipped 0.2 percent after soaring 2.4 percent against the dollar on Tuesday, its best one-day gain since February.
The sharp rise came on the back of a U.S. presidential debate in which Democrat candidate Hillary Clinton was judged the victor over Republican Donald Trump.
The peso is seen as a bellweather of emerging market sentiment on U.S. elections because of Trump’s views on curbing immigration and erecting barriers to trade.
“The peso is clearly undervalued but there is this Trump factor and until Nov 8 it will remain volatile,” said Murat Toprak, an FX strategist at HSBC. “Foreign participation in the local bond market is so high, there is a risk of capital outflows.”
Mexican five-year credit default swaps were trading at 167 basis points (bps) on Wednesday, according to Markit data, down from three month highs of 174 bps touched on Tuesday.
The yield premium paid by Mexican sovereign bonds over U.S. Treasuries on the JPMorgan EMBI Diversified also narrowed by four bps on the day to 292 bps.
Mexico’s central bank is meeting on Thursday and is expected to raise rates by 50 basis points, but a number of investors trimmed their bets on interest rate hikes following the peso’s rally on Tuesday.
The Turkish lira lost 0.1 percent against the dollar, with the finance minister saying Turkey would take action on the issues highlighted by Moody’s after it was downgraded to junk. Growth this year is expected to come in below 4 percent.
Asian currencies were mixed, with Indonesia’s rupiah hitting a 17-month peak on inflows linked to a tax amnesty programme but the Malaysian ringgit fell 0.4 pct after overnight pressure on the oil price.
The Polish zloty weakened 0.2 percent against the euro but the Czech crown held steady ahead of Thursday’s central bank meeting.
Jackson said there had been some speculation that the bank might exit the cap on the crown earlier than expected, fuelling inflows into the bond market and pushing down short term yields.
However, a Reuters poll found that 13 out of 17 analysts expect the bank to leave its weak crown policy unchanged.
For GRAPHIC on emerging market FX performance 2016, see link.reuters.com/jus35t
For GRAPHIC on MSCI emerging index performance 2016, see link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2016, see link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2016, see link.reuters.com/zyh97s
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see )
Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg
on year
Morgan Stanley Emrg Mkt Indx 912.00 +0.87 +0.10 +14.84
Czech Rep 866.34 -2.76 -0.32 -9.41
Poland 1737.74 +4.93 +0.28 -6.53
Hungary 27647.02 +165.98 +0.60 +15.58
Romania 6951.43 +38.35 +0.55 -0.76
Greece 568.07 +5.67 +1.01 -10.02
Russia 976.54 +3.36 +0.35 +28.99
South Africa 44778.95 +381.82 +0.86 -2.22
Turkey 77434.62 +273.95 +0.36 +7.96
China 2988.13 -10.05 -0.34 -15.57
India 28335.17 +111.47 +0.39 +8.49
Currencies Latest Prev Local Local
close currency currency
% change % change
in 2016
Czech Rep 26.99 26.99 +0.01 +0.04
Poland 4.29 4.28 -0.26 -0.73
Hungary 307.52 307.45 -0.02 +2.32
Romania 4.44 4.45 +0.11 +1.75
Serbia 123.10 123.09 -0.01 -1.32
Russia 63.94 63.63 -0.48 +14.10
Kazakhstan 336.98 336.40 -0.17 +1.04
Ukraine 25.81 25.77 -0.15 -7.20
South Africa 13.46 13.44 -0.17 +14.84
Kenya 101.20 101.20 +0.00 +0.99
Israel 3.76 3.74 -0.33 +3.52
Turkey 2.98 2.97 -0.09 -2.01
China 6.67 6.67 -0.03 -2.68
India 66.45 66.40 -0.08 -0.38
Brazil 3.23 3.23 +0.01 +22.46
Mexico 19.43 19.39 -0.21 -11.61
Debt Index Strip Spd Chg %Rtn Index
Sov’gn Debt EMBIG 365 0 .02 7 69.59 1
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