Stocks, Fx Dip on US-Iran Ceasefire Uncertainty; Focus on Cenbank Decisions

Stocks, Currencies Dip as US-Iran Ceasefire Uncertainty Drives Market Focus

By Johann M Cherian

April 22 (Reuters) - Stocks and currencies of major emerging economies slipped on Wednesday as investors avoided riskier assets on uncertainty regarding an extension to the U.S.-Iran ceasefire announced by U.S. President Donald Trump.

Market Reactions to Geopolitical and Economic Developments

Emerging Markets Performance

The day was also packed with central bank policy decisions and data on inflation from several countries that could offer insight into how the conflict was affecting prices across the globe.

MSCI's index for emerging market stocks slipped 0.4% from the pre-war peaks touched in the previous session, while a currencies gauge slipped 0.2% as the safe-haven dollar held at one-week highs. 

Oil Prices and Energy Supply Concerns

Crude prices rose nearly 2% to $100 a barrel as oil shipments through the Strait of Hormuz remained at a standstill. It was also not clear if Iran and Israel were in agreement with Trump's proposal.

Bringing some relief over energy supplies to emerging Europe, Ukraine said it would restart the Druzhba pipeline after completing repairs following a Russian attack earlier this year.

The resumption of oil supplies could unlock funds for Ukraine worth 90 billion euros halted by arguments over the pipeline, which delivered Russian oil to Slovakia and Hungary. Kyiv's bonds were broadly steady.   

Central Bank Decisions and Currency Movements

Turkey's Monetary Policy and the Lira

RATE DECISIONS, INFLATION DATA IN FOCUS 

Turkey's central bank is expected to join a number of other central banks in leaving interest rates steady later in the day, according to economists polled by Reuters on uncertainty over the repercussions of the war in Iran. 

The lira hovered near a record low of 44.92 per dollar, while stocks inched up 0.2%.

"In March, the conflict escalated and the market began to bet on rate hikes in Turkey," said Frantisek Taborsky, an EMEA FX & FI strategist at ING.

"Given some signs of an early end to the conflict, the market has calmed down since then and expectations are for stable rates today but with some risk of a rate hike. We expect rates to remain unchanged at 37.00% today."

Indonesia and South Africa: Policy Responses

Meanwhile, Indonesia's rupiah was little changed after the central bank kept policy rates unchanged as expected to support the currency, which has hit record lows multiple times this month.

In South Africa, investors were awaiting an inflation report, ahead of which the central bank said the Iran conflict was likely to add to price pressures and markets were pricing in at least two interest rate hikes this year. The rand edged higher 0.2%, tracking a 1% gain in gold prices. 

South Korea's Producer Prices

South Korea's won edged 0.4% higher after data showed producer prices rose in March at the sharpest pace in more than three years. 

Other Political and Economic Developments

US-UAE Financial Relations

Meanwhile, Trump said that the U.S. was considering helping the United Arab Emirates financially and a currency swap with the Middle East nation was under consideration. The country's international bonds were broadly steady.

Romania's Political Uncertainty

Political uncertainty continued in Romania after Prime Minister Ilie Bolojan said he would lead a minority government to ensure that reforms needed to tap European Union funds were met, in comments a day after the leftist Social Democrats (PSD) - his coalition's biggest party - withdrew their support.

The leu was flat against the euro, as were the country's international bonds. Romania's central bank is expected to release minutes from its most recent rate-setting meeting later in the day. 

Latin American Electoral Uncertainty

In Latin America, electoral uncertainty is set to continue as the chief of the country's electoral authority resigned over the long-delayed results to the April 12 election. Peruvian assets witnessed sharp losses in the previous session.

(Reporting by Johann M Cherian in Bengaluru; Editing by Kate Mayberry)