Reuters
London
Emerging shares rose for a second straight day yesterday while most currencies strengthened, lifted by the Federal Reserve’s show of confidence in the US economy, though Russia’s rouble eased after two days of gains.
Emerging market stocks rose 1.24%, the biggest daily gains in a month, after the Fed signalled it was on track to raise interest rates sometime next year but would take a “patient” approach.
That lifted US stock markets, and oil rose above $62 per barrel.
Bourses in oil exporters Saudi Arabia and the United Arab Emirates bounced back strongly after dramatic falls earlier in the week, with Dubai’s stock index closing 13% higher. Major European and African emerging currencies followed their Asian peers higher.
“A dovish Fed should bring some calm to the markets, although oil exporters such as Russia, Colombia and Mexico will likely remain pressured,” Merrill Lynch wrote in its weekly note.
“Emerging market vulnerabilities have come back to the forefront as 2015 approaches.”
The rouble and naira were outliers, however.
The rouble lost 2.8% against the dollar with traders saying President Vladimir Putin had so far offered no concrete measures at his end-of-year news conference to pull Russia out of crisis.
“Clearly the economic situation is very grim,” said Tatiana Orlova, a strategist at RBS, predicting more rouble volatility. Yet Russian markets appeared somewhat calmer after a dramatic rout at the start of the week.
Moscow’s dollar-denominated stocks gained 4.74% and sovereign and corporate bonds clawed back some of the losses they suffered earlier in the week.
Russian dollar-denominated debt spreads over US treasuries shrank to 629 basis points, down around 100 bps from the 5-1/2 year high they hit earlier this week.
The naira traded 0.16% higher to hit a record of 187.40 against the dollar after oil workers continued the walk-out they started on Monday.
The two major oil worker unions are scheduled to meet government officials later in the day for talks on how to resolve the stand-off
The Hungarian forint slipped 0.16% against the euro following a news conference at which central bank Governor Gyorgy Matolcsy said the bank felt no pressure to intervene and had no exchange rate target. The forint has lost more than 5% this year.
