EMERGING MARKETS-Stocks recover with bond markets subdued; Turkish lira jumps 1%

PUBLISHED: Mon, 01 Mar 2021 08:54:58 GMT

* MSCI EM index set for best day in a month

* U.S. Treasury yields fall

* Turkey’s economy expands 1.8% in 2020

* Russian rouble up; Moscow exchange starts longer trading hours

By Susan Mathew

March 1 (Reuters) – Emerging market stocks recovered on Monday from their worst weekly loss since a coronavirus-induced sell-off a year ago, while Turkey’s lira led currency gains as data showed its economy was among only a few globally to skirt contraction last year.

MSCI’s index of EM stocks rose 1.2% as bond markets stabilised after a sharp rise in U.S. Treasury yields last week sent global financial markets into a spin, leaving the EM index more than 6% away from its all-time high hit last month.

The index was on course for its biggest one-day gain in a month on Monday, with stocks from Asia to Africa in positive territory as yields on most short- and long-dated U.S. bonds fell.

While the bond market sell-off sparked volatility – JPMorgan’s EM hard currency debt index saw its worst start to year in 25 years – market experts pointed out that since the underlying implication of economic growth was positive, risk sentiment should remain buoyant.

“But absent a more coordinated and targeted action to tame long-end yields, bond market volatility is a coiled spring,” warned Mizuho analysts in a note. Optimism also stemmed from the progress of a large stimulus package in the Unites States as the House passed President Joe Biden’s $1.9 trillion coronavirus relief package, sending it to Senate.

With the dollar a tad weaker against most rivals, developing world currencies rose.

Turkey’s lira broke a five-session losing run and with a 1% jump was on course to log its best session in a month.

While world economies tumbled into recession last year, data on Monday showed the Turkish economy grew less than expected in the fourth quarter, but avoided contraction in 2020 thanks to a burst of credit support in the middle of the year

As oil prices rose Russia’s rouble firmed against the dollar. On the local exchange, trading in foreign currency, gold and derivatives opened three hours earlier than previously in a move to capture more Asian investors.

The Moscow Exchange will trade from 0400 GMT, extending its day to 17 hours to cover more time zones and boost liquidity.

South Africa’s rand rose 0.1% and stocks 2.3%. Johannesburg stock exchange data showed that offshore investors were net sellers of local stocks and bonds last week, selling 6.79 billion rand ($453.60 million) of stocks and 13.75 billion rand in bonds.

For GRAPHIC on emerging market FX performance in 2021, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2021, see https://tmsnrt.rs/2OusNdX

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see

(Reporting by Susan Mathew in Bengaluru; Editing by Kirsten Donovan)

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