LONDON Dec 12 Emerging stocks hit one-week lows
on Thursday, led down by Asian stocks after a provisional U.S.
budget deal pushed tapering expectations closer. Ukraine's
hryvnia currency hit fresh 4-year lows.
The Republican-controlled U.S. House of Representatives was
planning on Thursday to vote on a two-year budget deal, removing
the spectre of a year-end fiscal fight.
A deal would make it more likely the Federal Reserve could
ease up on the $85 billion-a-month bond-buying programme which
has fuelled demand for risky assets, analysts said.
But analysts at Societe Generale said this was not
necessarily negative longer term for emerging markets.
"An earlier initiation of QE tapering may provide some
relief as it will be viewed by investors as lowering uncertainty
surrounding Fed policies," they said in a note.
The MSCI emerging equities index fell 0.8 percent
to one-week lows, and is down around 6 percent on the year, hurt
by the prospect of tapering and by weak earnings growth.
Korean shares hit a four-week low closing low and
Indian stocks dropped more than 1 percent, though
Chinese shares were steady.
South African stocks fell nearly 2 percent, with
steep drops in gold stocks, and emerging European stock markets
all weakened, while currencies were steady to weaker.
Ukraine's hryvnia currency hit fresh four-year lows
after the ditching of a landmark trade deal with the European
Union triggered street protest.
President Vladimir Putin made a new attempt on Thursday to
woo Ukraine, touting the economic benefits of joining a customs
union with Russia and two other former Soviet republics.
Investors worry that without international aid, Ukraine will
run out of hard currency and will struggle to support the
hryvnia or to repay $7 billion in debts which come due next
Ukraine's currency forward markets are at their lowest in a
year, and are pricing in a 10 percent depreciation in the
currency within the next six months.
Short-term interest rates settled at lower levels after the
central bank briefly engineered a rise in the currency and
interest rates earlier this week.
Ukraine's more liquid dollar debt prices were steady to
firmer, however, after a bounce from record or multi-year lows
on Wednesday .
Some analysts say the bad news is already priced into
"We eventually expect a relatively peaceful resolution of
the crisis, likely involving negotiations with the president and
a new round of EU association agreement discussions, which the
president has already promised," said analysts at Bank of
America Merrill Lynch in a client note.
Ukraine's debt spreads tightened by 11 basis points to 1,004
bps on JP Morgan's EMBI-Global index, after a sharp narrowing on
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