By Claire Milhench
LONDON, Oct 25 (Reuters) - Emerging equities rose on Wednesday with some Asian markets hitting record highs, but gains in currencies were capped by a strong dollar and higher U.S. yields following reports that a policy hawk could be the next Fed chair.
Emerging markets were partly tracking gains on Wall Street, where the Dow Jones .DJI scaled a record closing high, helped by strong company earnings results and manufacturing sector data. emerging currencies struggled to make much headway in the face of a stronger dollar, which firmed 0.2 percent against a basket of currencies .DXY .
U.S. Treasury yields US10YT=RR also held at around five-month highs following reports that Republican senators are leaning towards John Taylor as the next Federal Reserve chair. The Stanford University economist is seen as someone who may put the Fed on a path of faster interest rate increases.
"We're being wagged by the U.S. dog - it's a mirror image of the U.S. market where equities are higher but expectations of an appropriately hawkish new Fed governor have pushed U.S. rates higher," said Koon Chow, an emerging markets macro and FX strategist at UBP.
"Not only is the global economy in good shape, but the U.S. economy is catching a second wind. That's the basis off which we get positive contagion to emerging markets," he added.
The latter was helped by a surge in banking shares such as State Bank of India SBI.NS , Punjab National Bank PNBK.NS and Bank of Baroda BOB.NS after the cabinet approved a $32.4 billion bank recapitalisation plan. mainland shares .CSI300 rose 0.5 percent to fresh 26-month highs, underpinned by tech firm profits and as the Communist Party unveiled a new leadership line up. gains extended into European trading, with Russian shares .MCX up 0.3 percent, supported by higher oil prices LCOc1 O/R , whilst Turkish stocks .XU100 continued to recover after Monday's sharp sell off.
Turkish assets have had a choppy week following a report that some Turkish lenders could face substantial U.S. fines, which was quickly rebutted by the Turkish banking regulator. said uncertainty stemming from the Kurdish independence referendum in Iraq had also weighed on the lira in recent weeks, but the Kurdish authorities are now striking a more conciliatory tone, offering to put the independence drive on hold. currencies delivered a lacklustre performance, with China's yuan CNY= dipping 0.14 percent and South Africa's rand ZAR= flat ahead of Finance Minister Malusi Gigaba's closely-eyed mid-term budget policy statement. fiscal deficit targets will likely be missed, so additional measures may be required to restore a robust fiscal consolidation path," analysts at Standard Chartered (LON: STAN ) said in a note, adding that they did not expect South Africa to be downgraded on Nov. 24, when S&P and Moody's have reviews scheduled.
The Hungarian forint EURHUF= weakened 0.2 percent, trading around a two-week low against the euro following the central bank's comments on Tuesday it stood ready to ease policy further. contrast the Czech crown EURCZK= was just off a four-year high hit on Tuesday after hawkish comments from a central bank official. central bank will meet later today, with expectations that it will cut rates by 75 basis points (bps) to 7.5 percent after 4 consecutive 100 bps cuts. lower house of Brazil's Congress is also set to vote on whether to put President Michel Temer on trial for corruption charges. For GRAPHIC on emerging market FX performance 2017, see http://tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2017, see http://tmsnrt.rs/2dZbdP5
For CENTRAL EUROPE market report, see CEE/
For TURKISH market report, see .IS
For RUSSIAN market report, see RU/RUB ) Emerging Markets Prices from Reuters
Net Chg % Chg % Chg
Morgan Stanley (NYSE: MS )
Emrg Mkt Indx .MSCIEF 1117.30
+3.98 +0.36 +29.58
+7.30 +0.69 +14.88
2460.42 +11.97 +0.49 +26.31
39548.89 +137.53 +0.35 +23.58
7877.13 -13.77 -0.17 +11.18
-2.78 -0.38 +14.10
+2.45 +0.22 -1.98
.JTOPI 51613.53 +16.04 +0.03 +17.57
.XU100 07682.57 +476.26 +0.44 +37.81
3398.30 +10.06 +0.30 +9.49
.BSESN 33041.85 +434.51 +1.33 +24.09
close currency currency
% change % change
South Africa ZAR=
Index Strip Spd Chg %Rtn Index
Sov'gn Debt 11EML EMBIG 301
.01 8 03.84 1
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Indian bank stocks soar on recapitalisation plan
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