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GLOBAL MARKETS-Emerging market rout eases as data lifts growth hopes
August 23, 2013 / 8:30 AM / 4 years ago

GLOBAL MARKETS-Emerging market rout eases as data lifts growth hopes

* Asian shares, currencies mark upbeat end to tough week
    * U.S. debt yields dip from two-year highs, Wall Street seen
    * European shares steady, Nikkei surges as yen falls
    * Upbeat manufacturing data hints at global recovery
    * Concerns remain about impact of Fed stimulus withdrawal

    By Marc Jones
    LONDON, Aug 23 (Reuters) - The rout in emerging markets
eased on Friday and world shares headed for a second day of
gains, as data suggesting the global economy is improving took
the edge off concerns about a cut in U.S. monetary stimulus.
    Wall Street was expected to open little changed with the
focus largely on housing data due at 1400 GMT (10 a.m. ET) after
gains in the previous session gave the S&P 500 a chance
to secure its first weekly rise in three weeks. 
    Ahead of the U.S. restart, Europe's main stock markets were
broadly steady but attention remained firmly on Asia after a
torrid week that has wiped billions of dollars off emerging
markets for the second time in two months. 
    MSCI's emerging share index was on track for its
first gains after six sessions in the red and the selling of
India's rupee subsided after the currency's worst week
against the dollar in decades.
    "Hopefully the worst (of the emerging market selling) may
now be over," said Hans Peterson global head of asset allocation
at SEB investment management, adding his firm may soon start
"bottom fishing" in Asia. 
    "It doesn't seem to be a repeat of the 1997 (Asian crisis)
situation ... and it seems like people are not so keen on being
extremely short anymore so it might twist around a bit."
    The relief rally was supported by a dip in U.S. bond yields
, which edged back from the previous session's
two-year high to 2.89 percent in European trading, while the
dollar steadied after hitting a three-week high. 
    Actions from under-pressure authorities also helped.
    Brazil unveiled an $60 billion currency intervention plan,
Turkey's central bank said it would apply more monetary
tightening while Indonesia scrapped a minerals export cap.

    This week's market turbulence has been driven by growing
evidence that the U.S. Federal Reserve is ready to start turning
off the taps on its huge stimulus programme, a conviction that
is being bolstered by strengthening global data.
    Germany confirmed on Friday that its economy grew at a
muscular 0.7 percent in the second quarter, while there was more
welcome news from Britain as it revised up its earlier Q2
    Purchasing managers surveys this week have already showed
better-than-expected growth in the euro zone, a Chinese
manufacturing rebound and U.S. manufacturing activity rising to
a five-month high. 
    The week's earlier falls meant Europe's FTSEurofirst 300
 was poised for its first weekly drop since June but the
region has been a major outperformer recently. 
    The rebound in Asia left MSCI's global share index
 up 0.3 percent though it was not enough to
prevent it heading for its third weekly fall on the spin.
    U.S. Treasury yields tend to set the benchmark for borrowing
costs across the globe, so the recent rise - which is expected
to continue as the Fed winds down support- is making it more
difficult for indebted countries and firms to pay their bills.
    Data from Boston-based fund tracker EPFR Global on Thursday
showed $1.3 billion fleeing emerging debt funds in the week
ending Aug. 21, the biggest outflow since
    Alvin Tan, an FX strategist for Societe Generale in London,
said as advanced economies start to pick up, the return
investors can get on their bonds and in their equity markets
also increases, making emerging markets less attractive.
    "We are seeing a stabilisation (in emerging markets) because
of a combination of better data and the lull in the selling but
over the next few weeks we think the selloff still has some way
to go."
    "The better data from developed markets does not help them
because the higher bond yields are here to stay," Tan said.
    Other market experts also pointed to the fact that whereas
May and June's sharp sell-off in EM markets calmed when the
change in direction of U.S. market rates made shorting (betting
against) EM assets unprofitable, this time that had not happened
meaning the selling could run for longer.
    Despite the selloff in Asia, Singapore Finance Minister
Tharman Shanmugaratnam said that it would not be in anyone's
interest for very low global interest rates to continue
indefinitely, as this leads to financial imbalances.    
    "The tapering of QE and tightening of U.S. monetary policy,
when it eventually occurs, will not be a bad thing for the
region's economies," Tharman told a banking conference.
    The dollar touched a near three-week high versus the yen
, supported by the rising U.S. bond yields and as Tokyo
shares rose after business surveys suggested the global economy
was improving.
    In commodities trading, copper prices were up 0.2
percent at $7,336 a tonne, continuing to rise in the wake of
Thursday's Chinese manufacturing data (PMI) that suggested
demand from the world's second-biggest economy and top metals
consumer could pick up.  
    Gold slipped slightly to $1,372 per ounce, heading
for a small loss for the week. The precious metal was buoyed by
the China PMI but at the same time pressured by upbeat global
economic data and bets on Fed tapering.
    Brent crude prices rose 0.3 percent to $110.29 a
barrel. Rising political tensions in the Middle East and North
Africa have bolstered oil prices this week, even as reports of
some Libyan ports readying for exports eased supply concerns.
    "We've got a much better global demand outlook and that's
the medium- to long-term driver for oil prices," said Michael
McCarthy, chief market strategist at CMC Markets in Sydney.

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