Business | Markets
Emerging market stocks get boost from strong US data
Holiday for US markets affects transatlantic volumes
- Reuters
- Published: 00:00 September 7, 2010
London: Emerging stocks hit four-week highs yesterday following stronger than expected US jobs data last week, and the Czech Republic and Montenegro began sales of euro-denominated bonds.
Global markets rallied on Friday after data showing a smaller than expected drop in US non-farm payrolls in August. US markets were shut for a holiday on Monday. Risky assets such as emerging markets have been volatile in recent weeks as investors assess whether or not the US will enter a double-dip recession.
"It's quiet today following the boost from the positive US employment data last week, liquidity will be low with the US holiday," said James Lord, emerging markets strategist at Morgan Stanley.
"Macroeconomic data will be closely watched to see if the scare we've had over global growth is over. The Fed's Beige Book survey on Wednesday could be one of these indicators of direction."
The MSCI emerging equities index rose 0.8 per cent to four-week highs and the Thomson Reuters emerging Europe index gained 0.2 per cent, also to four-week highs.
Emerging sovereign debt spreads tightened by 1 basis point to 276 bps over US Treasuries.
Sovereigns are looking to issue Eurobonds, taking advantage of spreads below the key 300 basis point level and the end of the vacation period for investors.
The Czech Republic has tightened guidance by five bps on a 2021 euro-denominated bond to mid-swaps +110/115 bps and orders already total more than 2 billion euros, according to Thomson Reuters service IFR. Montenegro set guidance on a debut Eurobond at a yield in the low 8 per cent area for a 200 million euro five-year issue.
Other potential issuers in the next few weeks include Lithuania, Nigeria and Ukraine.
Emerging market currencies were generally stronger. The Polish zloty hit a four-month high against the euro, boosted by strong growth data released last week.
The rand hovered near 2-1/2 year highs, helped by strength in the gold price, even though South Africa's central bank is expected to cut interest rates by 50 basis points to 6.0 percent later this week.
The Turkish lira hit a 2-1/2 week high against the dollar ahead of local holidays later this week, though Turkish stocks eased from record highs hit on Friday on Turkey's domestic recovery and strong banking sector.
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