By Asher Levine and Sujata Rao
SAO PAULO/LONDON Feb 21 Eastern and Central
European bonds and stocks gained on news of a deal on Friday to
end a violent standoff in Ukraine, while Brazil's real currency
extended gains as market analysts gave a cautious thumbs up to a
new fiscal savings plan.
In the Ukrainian capital Kiev, opposition leaders signed an
EU-mediated accord with President Viktor Yanukovich, aiming to
resolve a political crisis and opening the way for an early
presidential election this year.
Hopes for a possible end to the crisis and street violence
that has killed at least 77 people this week also supported
assets in nearby emerging markets, including Turkey and Central
and Eastern Europe.
Ukraine's dollar-denominated bond maturing
in June 2014 rose 1.417 point to bid 96.667, according to
Tradeweb. Ukraine's 2017 dollar bond rose 3.045
points to bid 87.154, off recent record lows of 83, according to
Debt insurance costs on Ukraine, which had hit their highest
since 2009, also fell by more than 3 percent, according to
Markit's five-year credit default swap quotes.
Returns on Russian, Hungarian and Croatian bonds rose
modestly, and Turkish bond returns strengthened by 0.51 percent,
according to J.P. Morgan's Emerging Markets Bond Plus index
Stock markets also rallied in Russia, Poland and Romania and
edged higher in Hungary.
Shares in Polish bank PKO rose 1.2 percent and
Hungarian bank OTP gained 2 percent. Both banks have
RBS analyst Tatyana Orlova noted that Ukraine is still in
dire financial straits, given the fresh delay to the second
tranche of a Russian loan that stands between Kiev and a debt
A Russian envoy sent to Kiev by President Vladimir Putin
said Moscow still had questions about the EU-brokered peace
deal, Interfax reported on Friday.
"This is not the end of the story. What I am reading is
there is a deal but the devil is in the details... The urgent
need is for a technocratic cabinet that could take steps to
avert default," Orlova said.
"The key thing to watch is the Eurobond maturing in June, if
things are not clarified by then, we could see a default."
The Russian rouble gained 0.6 percent on expectations
of a Ukraine deal and end-month tax payments.
In Latin America, Brazil's real extended Thursday's
gains against the dollar as investors continued to view the
government's new primary budget surplus target with cautious
optimism. The target of 1.9 percent of gross domestic product,
target, albeit lower than in previous years, could help build
credibility in the nation's economic policies.
Brazil in 2012 and 2013 fell short of its goal for the
primary budget surplus, a key gauge of debt-servicing capacity
since it represents the excess of public sector revenues over
expenditures but excludes interest payments.
"Yesterday's budget announcement was better than expected:
specifically, it showed more realistic macroeconomic assumptions
and could please market participants and rating agencies," wrote
JP Morgan Securities analyst Fabio Akira Hashizume. "However, we
still see some inconsistencies in the policy, and execution
risks remain high."
Mexico on Friday reported slower than expected fourth
quarter economic growth due to a drop in manufacturing and a
slowdown in services. But the peso still strengthened
slightly, as investors maintained expectations for an interest
rate hike by the end of the year.
Other Latin American currencies remained little-changed,
while the region's stocks advanced slightly
following stronger earnings from some Brazilian and Mexican
companies, such as retailer Lojas Renner SA and
broadcaster Grupo Televisa.
MSCI's broader emerging market equities index
rose 0.9 percent off one-week lows, putting it on track for its
third straight weekly gain. Still, emerging equity funds saw
their 17th straight week of outflows.
However Chinese mainland stocks erased a week of gains on
back of the yuan's biggest weekly drop since 2012 which has
sparked debate on whether the currency's trading band will be
The offshore yuan slid past 6.10 per dollar, for
its biggest one-day loss since October 2011 as traders unwound
what has been one of the most popular carry trades this year
following a weaker yuan in the mainland market.
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see )