Russian, Qatar stocks fall; broader emerging markets calm pre-Fed
London (June 13) Russian stocks fell 1 percent on Tuesday, faced with the possibility of a fresh round of U.S. sanctions, although the rouble, like most other emerging currencies, edged up against the dollar on the eve of a U.S. Fed meeting.
The U.S. Federal Reserve is widely expected to raise interest rates on Wednesday but this is mostly priced in and is unlikely to trigger much emerging market weakness unless accompanied by unexpectedly hawkish language. MSCI's emerging equity benchmark snapped a two-day losing streak to gain 0.2 percent, lifted by heavyweight South Korea , where shares bounced 0.7 percent after a 1 percent fall fuelled by the U.S. tech share selloff.
The rouble and Kazakhstan's tenge gained 0.3 percent, thanks to support from oil which advanced on news Saudi Arabia would make supply cuts. China's yuan also benefited from speculation that a Fed rate hike could see Beijing follow suit, as they did in March.
Russian stocks were the biggest losers, hit by steep losses in technology, financial and mining shares after U.S. senators reached a deal on legislation allowing for fresh sanctions on Russian mining, metals, shipping and railways as well as on Russians found guilty of human rights abuses.
The agreement, which could come up for a vote this week, also included a provision that would prevent the White House from easing, suspending or ending sanctions without congressional approval. "U.S. Senate (moved) a step closer to approving an extensive sanctions bill against Russia, apparently including mining, metals, shipping and railways, plus set in stone others imposed by (former U.S. President Barack) Obama," said Simon Quijano-Evans, emerging markets strategist at Legal & General Investment Management.
"This would certainly be farther-reaching than the executive-order-only imposed sanctions," he added.
However, some of the falls are also down to the market playing catch-up after a long weekend with worldwide equity losses.
Russian assets also showed little reaction to the demonstrations across the country on Monday, when baton-wielding riot police broke up anti-corruption protests and detained hundreds of demonstrators .
The political tensions in the Gulf continued to weigh on stocks, with Qatar's index dragged lower by the Qatar National Bank - the region's largest lender - which tumbled 1.3 percent. Qatari banks have been reeling under worries that the embargo mounted against Doha by other Arab states could reduce its access to foreign funding. Riyal one-year forwards inched to record lows around 3.728 per dollar Jakob Christensen, head of EM research at Danske Bank said markets appeared to be sanguine about the Fed's post-meeting statement.
"Given the recent softness of (U.S.) data, they will be quite careful in being too hawkish," he added.
Source: Reuters
