EMERGING MARKETS-Stocks hit 12-day lows; Fed, Argentina in focus

miércoles 18 de junio de 2014 05:52 GYT

By Carolyn Cohn

LONDON, June 18 (Reuters) - Emerging stocks fell to a 12-day low on Wednesday on concerns the U.S. Federal Reserve could strike a more hawkish tone later in the day, dampening interest in emerging market assets, while Argentinian debt insurance costs rose on default worries.

A stronger-than-expected reading for U.S. inflation on Tuesday raised expectations that the Fed could consider bringing forward the timing of an interest rate hike.

Emerging markets have been rallying in recent weeks as markets pushed back the expected timetable for higher U.S. rates.

"While the surprise rise in inflation is unlikely to alter today's FOMC decision to keep the target rate on hold...the adjoining statement will likely fuel a sell-off in EM FX that accelerated after yesterday's CPI release," said SEB analysts in a client note.

Argentina's five-year credit default swaps rose 38 basis points to highly distressed levels of 2,623 bps, according to Markit, their highest in more than four months, after a court ruling this week raised the spectre of default.

If a resolution is not found by June 30 to the battle with hedge funds who refused to take part in Argentina's debt restructuring after its catastrophic 2001-2 default, the country would be barred from making coupon payments on the restructured bonds, pushing it into technical default.

"Little time is left for a negotiated solution that could avoid failure to pay the coupon/principal due at the end of June, (meaning) that the probability for a CDS trigger has risen," said Deutsche analysts in a client note.

The MSCI emerging equities index fell 0.3 percent to its lowest in 12 days.   Continuación...