LONDON, Dec 3 (Reuters) - Emerging market stocks extended losses on Thursday after the Federal Reserve chief reinforced the case for an interest rate hike while Brazilian assets abroad gained as lawmakers started impeachment proceedings against President Dilma Rousseff.
MSCI’s broadest emerging market index slipped 0.4 percent in its second straight day in the red as bourses in Asia, South Africa, Russia and the Middle East all chalked up losses.
Currencies painted a more mixed picture, as Fed chair Janet Yellen said she was “looking forward” to raising rates, but European Central Bank chief Mario Draghi appeared set to announce more stimulus measures later on Thursday.
“It’s quite impressive to see how EM has stomached Yellen’s comments, and that’s probably because of the expectation of support from the ECB later today,” said UBS strategist Manik Narain.
The ECB is expected to deliver a cocktail of measures that could include a deposit rate cut and changes to its asset-buying programme.
An ECB move could be beneficial for central and eastern European assets. Poland’s zloty extended the previous day’s gain to rise 0.2 percent against the euro.
Turkey’s lira and South Africa’s rand rose 0.2 percent against the dollar to extend previous gains.
Yet the rouble fell 0.6 percent against the dollar to trade at its weakest level since mid-September as President Vladimir Putin warned that Russia should prepare for the possibility of prolonged low commodity prices and sanctions.
Meanwhile, Brazilian assets listed in Europe notched up solid gains after parliament launched impeachment proceedings against President Dilma Rousseff on Wednesday.
London-listed iShares MSCI Brazil gained 4 percent to 1247.5 pounds, the highest since last Friday. Brazilian American Depositary Receipts (ADRs) listed in Europe rose 2-3 percent, with the Frankfurt-listed ADR for Brazil’s state-run oil company Petroleo Brasileiro SA jumping 3.4 percent to 3.673 euros.
“Brazil is probably the biggest concern among emerging market countries at the moment, similar to the way that Russia was regarded a year ago,” said UBS’s Narain, adding that the market saw the impeachment efforts as something that could bringing about greater economic reform.
“But it’s very unclear if that assumption will prove to be correct,” Narain said.
Rousseff has become Brazil’s most unpopular president in a generation as the once-booming economy, Latin America’s largest, has subsided into stagnation on her watch.
For GRAPHIC on emerging market FX performance 2015, see link.reuters.com/jus35t
For GRAPHIC on MSCI emerging index performance 2015, see link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2015, see link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2015, see link.reuters.com/zyh97s
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see ) (Reporting by Karin Strohecker; Editing by Kevin Liffey)