July 7, 2011 / 11:12 AM / 7 years ago

EMERGING MARKETS-Russia, S.Africa stocks rally

 * Emerging stocks edge up, debt spreads tighten
 * Russian stocks hit 2-mth high, S.Africa 5-wk peak
 * Turkey markets digest cabinet changes
 * Israel c.bank says will act to curb house prices
 By Carolyn Cohn	
 LONDON, July 7 (Reuters) - Stock markets in Russia and South
Africa bounced on Thursday, as hopes China is nearing the end of
its tightening cycle buoyed commodity prices, though central
European markets were mainly steady ahead of an expected euro
zone rate rise.	
 China raised interest rates for the third time this year on
Wednesday, helping Chinese stocks and making clear that taming
inflation remains a top priority even as the pace of economic
growth gently eases. 	
  Russian stocks rose more than 1 percent to hit
two-month highs, with oil LCOc1 at its highest in three weeks.
South African stocks hit five-week highs and the rand
 rose half a percent, with gold testing two-week
highs. 	
 The euro zone sovereign debt crisis continues to keep a lid
on riskier emerging market assets, however, after Moody's this
week downgraded Portugal's rating to a junk level of Ba2, and
warned of a second bail-out. 	
 The euro/dollar exchange rate is choppy as markets focus on
the conflicting forces of a debt crisis and rate hikes, analysts
said, leaving emerging European currencies uncertain. 	
 "Spreads in Greece are continuing to widen out, it's keeping
the market quite jittery," said Imran Ahmad, emerging FX
strategist at RBS.	
 "Everyone is expecting a euro zone rate hike today, the
market consensus is that they will hint at another rate
increase."	
 Other reports on Thursday kept investors uncertain about
emerging markets.	
 Food prices, a concern for emerging markets where food tends
to makes up a large part of consumer price baskets, showed a
surprise rise in June, according to the U.N. Food and
Agriculture Organisation 	
 Emerging economies grew at their weakest pace in two years
in the second quarter of this year, the HSBC's quarterly index
showed, though a sharp fall in input cost inflation suggested
that efforts to curb price rises had gained traction.
  	
 The MSCI emerging equities index edged up 0.2
percent, while the Thomson Reuters emerging Europe index
 softened to a one-week low.	
 Romanian stocks hit seven-week highs, following a
ratings upgrade by Fitch to investment grade earlier this week.	
 Romania is now rated at investment grade by two of the three
major ratings agencies, which will enable it to attract a larger
number of investors, analysts say.	
 Emerging European currencies were largely steady within
recent ranges.	
 Emerging sovereign debt spreads tightened by 4 basis
points to 267 bps over U.S. Treasuries.	
 Sri Lanka has mandated four banks for a series of investor
meetings starting July 11, expected to result in a $1 billion
10-year bond, according to IFR, a Thomson Reuters news and
markets information service.	
 Investors in Turkey digested a cabinet reshuffle made on
Wednesday in which Prime Minister Tayyip Erdogan retained
Finance Minister Mehmet Simsek to manage an overheating economy,
and named Zafer Caglayan as economy minister.	
 "Bottom line -- no major changes in the way the
economy/finances will be run," said Simon Quijano-Evans, chief
EEMEA economist at ING, in a client note.	
 The shekel was up 0.25 percent as Israel's central
bank governor Stanley Fischer said policymakers would act to
further slow the pace of house price increases. 	
 The central bank paused in its rate-tighening cycle in June,
leaving rates unchanged for only the second time in six months. 	
 In Serbia, the dinar fell half a percent on the
day after the central bank cut rates for the second straight
month. 	
(Editing by Anna Willard)	
	
 	
 
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