By Sebastian Tong
LONDON, May 24 (Reuters) - Firmer commodity prices on Tuesday offered emerging markets a reprieve after the previous day's pounding from escalating fears over the euro debt crisis.
Israel's shekel was flat against the dollar a day after its fourth interest rate hike in five months while foreign-exchange trading in Belarus ground to a halt after Monday's announcement of a 36 percent devaluation of its rouble currency.
Brent crude futures led the commodities rise after Goldman Sachs raised its 12-month price forecast for the benchmark, citing global economic growth and tight production capacity.
Heavy NATO air strikes on Tripoli early on Tuesday underscored the ongoing loss of Libyan production.
Led by strong gains in Russian shares, the emerging equity benchmark rose half a percentage point, rebounding from Monday's two-month low when it suffered its biggest one-day fall in nearly a year.
'It's becoming a classic pattern. Every week we have fears growing on Friday afternoon, an ugly Monday and stabilising a little on Tuesday. There is not much to drive this change except we have reached some technical levels,' said Gaelle Blanchard, emerging markets strategist at Societe Generale.
Emerging European shares were firmer, helping to offset losses in the Asian session which saw the key Shanghai Composite Index slide to its lowest level in four months amid flagging Chinese economic growth.
Emerging sovereign debt tightened 3 basis points to trade at 278 bps over U.S. Treasuries.
Romanian shares slipped 0.6 percent to their weakest levels in four months but steadier commodity prices pushed Russian shares up over 1 percent, bouncing off five-month lows.
South African shares rose 0.8 percent to come off Monday's two-month lows.
'We are quite cautious -- the euro zone story is not solved yet. It's still very difficult to have a strong view on direction right now,' SocGen's Blanchard said.
A Spanish voter revolt against austerity and ratings warnings for Belgium and Italy have kept worries over euro zone debt on the boil.
Moody's Investors Service became the last of the three major ratings agency to warn that any kind of Greek debt restructuring would constitute default and would hurt other euro zone states.
BELARUSSIAN DEVALUATION
Russia's rouble and the South African rand were aided by steadier commodity prices but most emerging European currencies stayed mainly on the backfoot.
The Czech crown and the Hungarian forint are languishing near two-month lows against the euro while Poland's zloty found a floor after slipping to near three-week lows gainst the common currency on Monday.
Ukraine's hyrvnia traded at a 13-month low versus the dollar.
The Israeli shekel was flat after firming on Monday against the dollar following an interest rate hike.
'Interest rate differentials (particularly against U.S. dollar rates) still suggest the record spreads are highly supportive of further shekel strength,' said Citi analyst Luis Costa in a client note.
Investors are also assessing Belarus's devaluation of its rouble by over a third to bringing the official exchange rate closer to the market rate.
The former Soviet republic, which is seeking a loan from Russia, has abandoned attempts to prop up its currency after burning a quarter of its reserves in the first three months of this year doing so.
'The (central bank) believes that the current devaluation is sufficient to stabilise the situation in the forex market. We tend to agree with this view although (recent) turbulence and turmoil in the market increase uncertainty and encourage speculative attacks on the rouble,' said BNP Paribas Russia and CIS Chief Economist Julia Tsepliaeva in a research note.
(Additional reporting by Carolyn Cohn; editing by Stephen Nisbet) Keywords: MARKETS EMERGING (sebastian.tong@thomsonreuters.com; +44 20 7542 8561; Reuters Messaging: sebastian.tong.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
LONDON, May 24 (Reuters) - Firmer commodity prices on Tuesday offered emerging markets a reprieve after the previous day's pounding from escalating fears over the euro debt crisis.
Israel's shekel was flat against the dollar a day after its fourth interest rate hike in five months while foreign-exchange trading in Belarus ground to a halt after Monday's announcement of a 36 percent devaluation of its rouble currency.
Brent crude futures led the commodities rise after Goldman Sachs raised its 12-month price forecast for the benchmark, citing global economic growth and tight production capacity.
Heavy NATO air strikes on Tripoli early on Tuesday underscored the ongoing loss of Libyan production.
Led by strong gains in Russian shares, the emerging equity benchmark rose half a percentage point, rebounding from Monday's two-month low when it suffered its biggest one-day fall in nearly a year.
'It's becoming a classic pattern. Every week we have fears growing on Friday afternoon, an ugly Monday and stabilising a little on Tuesday. There is not much to drive this change except we have reached some technical levels,' said Gaelle Blanchard, emerging markets strategist at Societe Generale.
Emerging European shares were firmer, helping to offset losses in the Asian session which saw the key Shanghai Composite Index slide to its lowest level in four months amid flagging Chinese economic growth.
Emerging sovereign debt tightened 3 basis points to trade at 278 bps over U.S. Treasuries.
Romanian shares slipped 0.6 percent to their weakest levels in four months but steadier commodity prices pushed Russian shares up over 1 percent, bouncing off five-month lows.
South African shares rose 0.8 percent to come off Monday's two-month lows.
'We are quite cautious -- the euro zone story is not solved yet. It's still very difficult to have a strong view on direction right now,' SocGen's Blanchard said.
A Spanish voter revolt against austerity and ratings warnings for Belgium and Italy have kept worries over euro zone debt on the boil.
Moody's Investors Service became the last of the three major ratings agency to warn that any kind of Greek debt restructuring would constitute default and would hurt other euro zone states.
BELARUSSIAN DEVALUATION
Russia's rouble and the South African rand were aided by steadier commodity prices but most emerging European currencies stayed mainly on the backfoot.
The Czech crown and the Hungarian forint are languishing near two-month lows against the euro while Poland's zloty found a floor after slipping to near three-week lows gainst the common currency on Monday.
Ukraine's hyrvnia traded at a 13-month low versus the dollar.
The Israeli shekel was flat after firming on Monday against the dollar following an interest rate hike.
'Interest rate differentials (particularly against U.S. dollar rates) still suggest the record spreads are highly supportive of further shekel strength,' said Citi analyst Luis Costa in a client note.
Investors are also assessing Belarus's devaluation of its rouble by over a third to bringing the official exchange rate closer to the market rate.
The former Soviet republic, which is seeking a loan from Russia, has abandoned attempts to prop up its currency after burning a quarter of its reserves in the first three months of this year doing so.
'The (central bank) believes that the current devaluation is sufficient to stabilise the situation in the forex market. We tend to agree with this view although (recent) turbulence and turmoil in the market increase uncertainty and encourage speculative attacks on the rouble,' said BNP Paribas Russia and CIS Chief Economist Julia Tsepliaeva in a research note.
(Additional reporting by Carolyn Cohn; editing by Stephen Nisbet) Keywords: MARKETS EMERGING (sebastian.tong@thomsonreuters.com; +44 20 7542 8561; Reuters Messaging: sebastian.tong.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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