LONDON, March 13 Emerging market shares and currencies were broadly firmer on Thursday, shrugging off weak Chinese economic data and focusing on a stronger yuan and more stability on commodity markets.
The Russian and Turkish currencies were flat, however, remaining under pressure as the former looked set to be hit by Western sanctions and the latter was weighed on by escalating domestic tensions before March 30 local elections.
Chinese mainland shares rose 1 percent but parted gains after below-forecast industrial output and retail sales data that continued a run of sluggish data from the world's second-largest economy.
But a stronger yuan mid-point rate was seen for the first time in four days, boosting spot yuan prices and regional currencies, while gains on Asian bourses helped the benchmark equity index eke out a quarter percent gain.
The momentum filtered through to emerging Europe, but politics and their economic impact were seen curbing gains.
"We had weaker EM performance earlier this week on the back of increasing Russian and Ukrainian tensions, new political noises in Turkey and weak Chinese data. We're seeing some investors use that as better entry levels," Abbas Ameli-Renani, a strategist at RBS in London, said.
But, he said, markets appeared complacent about the risks ahead of this weekend's referendum that could see Crimea vote for independence from Ukraine. Kiev and its Western allies see the vote, supported by Russia, as illegal.
"We've had a massive liquidity squeeze in January and a Chinese economic slowdown, but a lot of that has not been translated into currency weakness," Ameli-Renani warned.
Russian shares pared early gains of up to 1 percent but were 0.4 percent higher by 0900 GMT as crude prices held above $108 a barrel after the previous session's 2-percent plunge caused by the release of oil from U.S. strategic reserves.
Prices for copper too steadied above multi-year lows.
Turkish stocks jumped 1 percent as the broader momentum lifted them off one-week lows but the market is facing big headwinds amid spreading anti-government rallies. A protester and a police officer were killed during Wednesday's protests, the worst such violence since last summer.
CURRENCY, DEBT PRESSURES
Currencies and local debt markets stayed under pressure however.
The lira was just off five-week lows after the central bank sold $50 million on Wednesday.
The rouble was flat too against the dollar, with the central bank moving the currency's target exchange rate corridor by 10 kopecks after interventions to the tune of $1.5 billion . The rouble has lost almost 10 percent this year.
Potential Western sanctions also raised serious risks to the economy which is already slowing down, but analysts say the central bank, which meets on Friday, cannot afford to support it with rate cuts because of the rouble's steady weakening.
"This sort of currency depreciation pressure, triggered by geo-political uncertainty, risks increasing domestic demand for hard currency," Unicredit analysts said in a note.
"2008 last provided evidence of a sharp shift in the deposit base. With this in mind, it seems very likely (the central bank) will maintain its policy rate at 7 percent tomorrow."
Russian 5-year rouble bond yields were just off 4-1/2-year highs, having spiked 50 basis points on Wednesday. Turkish 2-year yields are near 14-month highs.
On the dollar bond front, Russia's 2043 bond has been trading at the lowest prices since its September 2013 launch, though it enjoyed a one cent bounce on Thursday.
Ukraine's sovereign and quasi-sovereign dollar bonds maturing 2014 stayed near record lows as markets continued to await details of a financing package for the country.
But in a clear sign of how investors are distinguishing between emerging economies, Mexico, which was recently upgraded by ratings agencies, sold 1 billion pounds ($1.66 billion) worth of 100-year bonds on Tuesday at a 5.75 percent yield.
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