| LONDON, June 13
LONDON, June 13 Turkish markets fell on Friday
on the escalating violence in neighbouring Iraq, while the rand
weakened following an outlook downgrade for South Africa.
Sunni Islamist militants gained more ground in Iraq
overnight, moving into two towns in the eastern province of
Diyala, while U.S. President Barack Obama considered military
strikes to halt their advance towards the capital Baghdad.
Turkey, which has been suffering from a large current
account deficit, switched some of its export focus to Middle
Eastern countries like Iraq following the euro zone debt crisis.
"Iraq has been one of Turkey's fastest-growing export
markets - I don't think we can downplay the events in Iraq in
the context of Turkey needing to cut the current account
deficit," said Neil Shearing, head of emerging markets research
at Capital Economics.
The lira fell 0.5 percent to a nine-day low and
Turkish stocks also fell 0.5 percent, towards the
previous day's two-week low.
Iraq's 2028 dollar bond has dropped five
cents this week to 90.75 cents on the dollar and Iraqi spreads
have widened 70 basis points to 462 bps over U.S. Treasuries
The rand fell 0.75 percent, though remained within
recent ranges, after Fitch cut South Africa's outlook to
negative on its BBB rating, citing poor prospects for economic
growth and rising public debt.
Standard & Poor's is due to give its review on South
Africa's rating later on Friday.
Hit by a crippling strike in the platinum mines since
January, South Africa's economy contracted 0.6 percent in the
first three months of the year, the first quarterly output
decline since a recession in 2009.
"Recent events have focused people's minds on South Africa's
vulnerabilities," said Shearing.
The overall MSCI emerging equities index fell 0.4
percent, but was getting some support from China gains and was
on course for a modest 0.6 percent rise this week.
Russian markets were closed for a holiday. The zloty
tested eight-day lows ahead of Polish May inflation
data, after prices rose by only 0.3 percent in April.
Emerging sovereign debt spreads tightened by 2 basis
points to 283 bps over U.S. Treasuries, but have widened more
than 10 bps this week. They reached their narrowest since
February 2013 a week ago.
Continuing a recent run of issuance in euros, Morocco began
marketing a 10-year euro-denominated bond, according to Thomson
Reuters news service IFR, its first euro bond since 2010.
For GRAPHIC on emerging market FX performance 2014, see link.reuters.com/jus35t
For GRAPHIC on MSCI emerging index performance 2014, see link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2014, see link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2014, see link.reuters.com/zyh97s
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see )
(Additional reporting by Sujata Rao; Editing by Pravin Char)