By Claire Milhench
LONDON, Aug 22 (Reuters) - The Russian rouble retreated on Wednesday as investors worried about the growing sanctions risk from the United States and Turkey's lira took another pounding, while emerging equities edged up on cautious optimism ahead of Sino-U.S. trade talks.
U.S. lawmakers have been pushing for more aggressive steps against Moscow in response to Russia's annexation of Crimea, its involvement in Syria's civil war and cyber attacks to influence U.S. elections. rouble RUB= weakened 0.7 percent after the U.S. Treasury Department imposed new sanctions over malicious cyber-related activities and North Korean oil transfers in violation of United Nations restrictions. U.S. sanctions on Russian entities, relating to the nerve agent attack on a former Russian spy in Britain, were due to kick in on Wednesday. Hammarlund, chief emerging markets strategist at SEB, also highlighted Microsoft's MSFT.O discovery of hackers linked to Russia's government seeking to launch cyber attacks on U.S. political groups ahead of U.S. midterm elections. the markets are pricing in harsher sanctions than they were before," he said, noting that the rouble had fallen even though oil prices were up almost 1 percent LCOc1 , a rare decoupling.
Russia cancelled its regular weekly auction of government bonds citing a rapid increase in financial market volatility. The halt was the first of its kind since April when there was widespread selling of Russian assets in the wake of U.S. sanctions on Rusal 0486.HK . for Russia's rouble-denominated OFZ bonds, which are popular with foreign investors, have sky-rocketed this month, with the 10-year yield RU10YT=RR currently at around 8.6 percent.
Turkey's lira TRY= , which has fallen around 37 percent year-to-date on the back of wide-ranging political and economic concerns, was down another 0.7 percent in choppy trading as a dispute with the United States over detained American pastor Andrew Brunson dragged on. President Donald Trump's national security adviser said Turkey could end the lira-battering crisis instantly by freeing Brunson. Washington has ordered tariffs on Turkish goods in retaliation for Brunson's detention.
"I wouldn't be surprised if we see another bout of volatility in the lira," said Hammarlund. "If Trump's patience runs out he could announce new sanctions on Turkey, it could be individuals or some of the banks – that would be devastating."
He noted that Turkey's central bank was still reluctant to hike interest rates, which had reduced confidence. "They haven't announced any measures to tighten fiscal policy either and those are concerns that will keep pressure on the lira," he added.
But Chinese mainland shares .CSI300 retreated 0.6 percent after China's central bank said it would not resort to strong stimulus to support the slowing economy. is still some optimism that Sino-U.S. trade talks taking place in Washington over the next two days will go some way towards resolving the bitter tariffs dispute between the world's two largest economies, although Trump said he did not expect much progress to be made. officials reiterated they would not use the yuan as a weapon to deal with trade frictions, with another round of tit-for-tat tariffs due to take effect on Thursday. The yuan CNY= was trading flat after four days of gains. Africa's rand ZAR=D3 slipped 0.2 percent after headline consumer inflation quickened to 5.1 percent year-on-year in July. International Monetary Fund said late on Tuesday that it would begin talks with Angola over providing financial support. Angola asked for assistance from the IMF back in April but this had not originally involved any financing. GRAPHIC on emerging market FX performance 2018
Net Chg % Chg % Chg
Morgan Stanley (NYSE: MS )
Emrg Mkt Indx .MSCIEF 1047.18
+2.87 +0.27 -9.61
+5.80 +0.54 -0.32
-3.82 -0.17 -7.48
36519.47 -488.19 -1.32 -7.26
8196.27 -15.57 -0.19 +5.71
-2.44 -0.35 -12.41
-2.11 -0.20 -7.31
.JTOPI 51596.23 +470.39 +0.92 -1.78
.XU100 90185.99 +1451.23 +1.64 -21.80
2714.61 -19.22 -0.70 -17.92
+7.00 +0.02 +12.42
close currency currency
% change % change
67.19 -0.66 -14.75
South Africa ZAR=
14.38 -0.23 -14.26
6.05 -0.70 -37.82
4.05 -0.06 -18.20
Index Strip Spd Chg %Rtn Index
Sov'gn Debt 11EML EMBIG 390
.02 7 70.39 1
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