| LONDON, July 21
LONDON, July 21 Russian markets, under the
shadow of new sanctions, slumped 1.4 percent on Monday,
extending last week's 5 percent slide, while UAE property stocks
came under renewed pressure, hit by troubled building company
The increasingly deadly conflict between Israel and
Gaza-based militants, fighting in eastern Ukraine and new
sanctions on Russia over its perceived role in the Ukraine
crisis were capping further advances in global equities, with
MSCI's emerging index half percent off recent 16-month highs
The shooting down of a passenger jet over Ukraine has
significantly worsened Russia's relations with the West. The
United States last week slapped new sanctions on Russia while
Britain, Germany and France have agreed they should be ready to
ratchet up sanctions over the downing of the Malaysian airliner.
European foreign ministers meet in Brussels on Tuesday.
Moscow-listed stocks fell 1.4 percent after last
week's 5 percent slide to one-month lows with shares in Rosneft
, one of the sanctioned companies, dipping to 2-1/2
month lows. Russian stocks are this year's worst performers
among emerging market, having lost 12 percent in dollar terms,
compared with 6 percent gains for the MSCI index as a whole.
On bond markets, Russia's sovereign 2030 dollar bond
stabilised off six-week lows hit last week
while Rosneft's 2022 dollar bond fell almost
one cent, but stayed off recent 5-week lows.
The rouble meanwhile firmed 0.3 percent, rising off
five-week lows versus the dollar.
"There is a bit of stability (in currency and bond prices)
after significant selling pressure last week. Also the sanctions
are targeting a limited number of companies which are not in
urgent need of finance in the short-term," Sebastien Barbe, head
of emerging FX strategy at Credit Agricole in Paris, said.
"There is also talk the central bank may hike rates this
week and that's supporting the rouble," he said referring to the
upcoming policy meeting on Friday.
Commerzbank analysts advised clients to stay underweight
rouble debt and neutral on hard currency Russian bonds.
"Tomorrow's EU foreign minister meeting is obviously going
to be the next dateline for markets ... Given all the events of
the past weeks, as well as increasing U.S. sanctions, EU leaders
are coming under heightened pressure to do something to make
their point," Commerzbank told clients.
Five-year Russian credit default swaps (CDS) rose 8 basis
points to 216 bps, up more than 40 bps since early last week,
Markit data shows. Ukraine 5-year CDS rose 21 bps to 793 bps.
In the Gulf, markets stabilised after opening sharply lower
as shares in builder Arabtec plunged for a second day
after a weekend statement from key shareholder Aabar Investments
appeared to dash expectations of support.
The Dubai index initially tumbled around 3 percent,
adding to a 6 percent slide on Sunday. Nearby Abu Dhabi
fell 1 percent, after losing 3 percent in the previous session.
Both markets later traded firmer as some buyers crept in.
Foreign investors remain wary of the market however,
dominated by local retail buyers and prone to wild swings.
"The renewed volatility is not going to do any favours for
Arabatec and the market. With the lack of visibility, this is
not one of those special situations where we would seek to pick
up distressed stock at a discount," Daniel Broby, chief
executive of Gemfonds in London, said.
Other big UAE real estate firms such as Aldar and
Union Properties also slumped but recovered during the
session. The Saudi and Qatari stock indexes also
fell but losses were muted.
South Africa's rand touched three-week highs, holding
on to gains from last week when the central bank raised rates.
Central European currencies were stable.
"The market has not completely priced the re-emergence of
political risk worldwide and we must be careful because of
that," Barbe of Credit Agricole said.
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 Chris Vellacott. Editing by Jane