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EMERGING MARKETS-Russian assets fall, broader stocks steady near 3-yr high
August 29, 2014 / 9:30 AM / 3 years ago

EMERGING MARKETS-Russian assets fall, broader stocks steady near 3-yr high

LONDON, Aug 29 (Reuters) - Military tensions and a worsening economy put Russian dollar-denominated stocks on track on Friday for a 4 percent loss on the month, bucking broader emerging equities that were poised for their seventh straight month of gains.

Russia stands accused of sending troops into Ukraine to shore up a separatist rebellion that had appeared to be ebbing. That has sharply escalated the five-month conflict over eastern Ukraine and raised the spectre of fresh sanctions from the West.

“If you look at Russia from a bottom-up perspective, it’s gone from bad to worse,” Benoit Anne, head of emerging markets strategy at Societe Generale, said, although “the crisis has struggled to take it to the status of a global markets event.”

The rouble fell 0.35 percent against the dollar to touch a fresh record low while dollar-denominated Moscow stocks hit a two-week low and were down 0.7 percent after Thursday’s 2 percent fall, eyeing losses for the week of 4 percent.

Russian dollar bonds too have slipped in price since news of the military incursion, with yield spreads over U.S. Treasuries widening 20 basis points over the week.

Russian 10-year rouble debt yields rose 11 bps after a 35-bps jump on Thursday.

Broader emerging markets have remained relatively unruffled however, with MSCI’s emerging equity index trading just off Thursday’s three-year highs, helped by a rise in Chinese stocks and by a fall in safe-haven U.S. 10-year yields.

The emerging stocks index is heading for its seventh straight month of gains and is up 8.5 percent year-to-date.

Turkish stocks rose 0.7 percent to three-week highs, after data showing a narrower than expected trade deficit in July.

Emerging European currencies were steady to slightly firmer.

The zloty, seen as a proxy for contagion to central Europe from the Ukraine crisis, hit five-month lows early on Friday. But it trimmed losses following data showing growth up a stronger-than-expected 3.3 percent year-on-year in the second quarter.

The rand, which Anne said was benefiting from safe haven status due to its distance from Ukraine, reached an 11-day high. But South African stocks hit 2-1/2 week lows.

For GRAPHIC on emerging market FX performance 2014, see

For GRAPHIC on MSCI emerging index performance 2014, see

For GRAPHIC on MSCI emerging Europe performance 2014, see

For GRAPHIC on MSCI frontier index performance 2014, see

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see ) (Editing by Mark Heinrich)

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