Fed, Ukraine worries pressure stocks for third session



By Susan Mathew and Anisha Sircar

Jan 25 (Reuters) - Emerging market shares fell sharply for a third straight session on Tuesday as the threat of Russia-Ukraine military conflict and wariness over U.S. monetary policy weighed on sentiment.

Equity markets in Turkey .XU100 , Hungary .BUX and Romania .BETI fell between 0.2% and 2.9% in volatile trade as the West stepped up preparations for its response to any Russian invasion of Ukraine.

But after a brutal European session on Monday, other markets were showing signs of stabilising. Russia's IMOEX .IMOEX share index climbed 1.2%, paring the previous session's near 6% slide, while those in South Africa .JTOPI and Poland .WIG firmed around 1.3% each.

"Markets are trading very nervously. At the moment, we're seeing increasing tensions being built up around Ukraine from both sides," said Jakob Christensen, chief analyst and head of EM research at Danske Bank.

"The next step to watch out for is the U.S. response to Russian demands," he said.

Given the rouble's slide - 4.7% this year - Christensen expects the Russian central bank to be slightly more hawkish in February and sees a 50 basis points interest rate hike.

Russia's rouble RUB= was 0.6% stronger at 78.6 a dollar after sliding to 14-month lows on Monday, while Ukraine's hryvnia UAH= edged 0.2% higher after its worst session in almost two years.

Russian OFZ bonds RU10YT=RR steadied, while hard-currency debt RU234748670= RU097172196= continued to fall on Tuesday.

The broader MSCI index of emerging shares .MSCIEF fell 1.1% as investors braced for a hawkish Federal Reserve.

While a 25 basis point hike in March is fully priced in, there is plenty of market speculation about a rate raise as soon as Wednesday when the Fed concludes its two-day meeting.

Ahead of the Chinese New Year holidays, mainland shares .SSEC .CSI300 lost more than 2%, while the yuan CNY= hit 3-1/2 year highs. Singapore's dollar outperformed regional peers after a surprise hike in interest rates.

With tech stocks down and North Korea firing what appeared to be two cruise missiles into the sea off its east coast on Tuesday, South Korea's KOSPI .KSII slumped to over one-year lows.

The EM index has lost about 1.8% this month but is nonetheless faring significantly better than MSCI's all-country index .MIWD00000PUS , which is down about 6% for the year with pressure coming from the high-value cluster that includes Apple AAPL.O , Amazon AMZN.O and Meta FB.O among others.

Hungary's forint EURHUF= was flat ahead of a central bank meeting later in the day when a 30 bps hike to 2.7% is expected, with inflation this year forecast at its strongest in a decade.

On Thursday, South Africa is seen hiking by 25 basis points to 4%.

For GRAPHIC on emerging market FX performance in 2021, see Link For GRAPHIC on MSCI emerging index performance in 2021, see Link

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see



War worries hit Russia Ukraine markets Link
EM stocks outperform Link



Reporting by Susan Mathew in Bengaluru; Editing by Kirsten
Donovan

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.