LONDON, July 31 (Reuters) – Emerging stocks hit four-week
highs on Tuesday on strong showings in Latin America and East
Asia reflecting hopes of monetary stimulus by the European
Central Bank, though some caution set in during emerging
European trade.
Risky emerging markets have been gaining in anticipation
that the ECB could revive its bond purchase programme following
its meeting on Thursday, after President Mario Draghi said last
week that the ECB was ready to do whatever it takes to preserve
the euro.
“After Draghi’s comments, the market is still expecting
something happening this week from the ECB. If there’s a big
disappointment, it’s going to be a little bit ugly,” said Gaelle
Blanchard, emerging FX strategist at Societe Generale.
South Korean stocks gained 2.07 percent, while
Taiwanese stocks rose 1.56 percent. Brazilian stocks
were up 1.2 percent.
While benchmark emerging stocks gained 0.91
percent, emerging European stocks dipped by 0.17
percent, with Russian stocks falling 0.56 percent in
line with softer oil prices.
The Romanian leu continued tentatively to recover
from all-time lows set in recent weeks, gaining 0.1 percent, yet
analysts warned that the respite may be brief.
Prime Minister Victor Ponta failed to oust President Traian
Basescu in a referendum on Sunday, easing tensions with the
European Union and the International Monetary Fund, which is
supplying aid that the country needs to shield itself from the
euro zone crisis.
“It’s not the end of the story, in terms of uncertainty
it’s not that good,” Blanchard said.
“We will have a struggle at least until the parliamentary
elections. The other important factor is whether the IMF project
goes on. With the election coming, it’s whether (politicians)
will want to show something to the people, not just austerity.”
Continued…
