* Emerging assets rebound spurred by German survey
* South Africa's rand up as much as 2 pct on commodities
* Turkish markets up ahead of expected rate cut
By Sebastian Tong
LONDON, Aug 18 (Reuters) - Emerging markets steadied on
Tuesday, a day after suffering their biggest one-day fall in
4-1/2 months, as brightening German economic sentiment offset
overnight losses on Wall Street and volatile Chinese markets.
South Africa's rand rose as much as 2 percent against the
dollar <ZAR=>, clawing back recent losses on a recovery in
commodity prices, while Turkish assets rose ahead of an expected
interest rate cut later in the day.
Emerging shares <.MSCIEF>, which fell over 3.8 percent in
the previous session to hit their lowest level in nearly four
weeks, firmed 0.4 percent by 1030 GMT.
Emerging sovereign debt spreads tightened 4 basis points to
trade at 380 bps over U.S. Treasuries.
A survey by Germany's ZEW research institute showed analyst
and investor sentiment in Europe's largest economy improving
more than expected, spurring a rebound after Monday's sell-off
saw U.S. shares suffer their worst loss in seven weeks.
[]
A late rebound in Chinese stocks also helped soothe investor
fears that a rally which has driven the country's shares up 90
percent this year may have outpaced its economic recovery.
"The ZEW survey out of Germany was remarkably positive
across the board, not just in one or two elements or in the
headline number," said Zsolt Papp, chief economist emerging
Europe at KBC.
"Investors are not quite ready to take the market lower. No
one's really convinced this is the starting point of a big rally
but everyone is afraid of taking this market really lower."
Romanian shares <> rose 1 percent after falling nearly
5 percent on Monday, their biggest one-day loss in three months.
A rebound in commodity prices supported modest gains in
Russian <> and South African shares <.JTOPI>, which both
rose just under 1 percent after falling 5 percent and 3 percent
respectively in the previous session.
SOUTH AFRICA
Stronger commodity prices nudged the rouble 1 percent higher
against its dollar-euro basket <RUS=MCX>.
The rand, which retreated nearly 1 percent in the previous
session, recovered to rise as much as 2 percent versus the
greenback before paring gains.
Second-quarter gross domestic product figures from South
Africa showed a smaller-than-expected contraction but otherwise
provided little support for the currency. []
"It provides confirmation that South Africa's economy still
lags that of the rest of the world," said Razia Khan, regional
head of research Africa at Standard Chartered Bank.
"This is likely to give rise to more thinking on how to make
the fiscal stimulus more effective."
Along with its equity market, Turkey's lira currency <TRY=>
and its bonds <TRGLB30=RR> were higher ahead of a central bank
meeting later in the day widely expected to yield a 50 bps cut.
"We expect a mildly positive reaction on the bond market
after the decision but we do not foresee substantial
declines in yields in the coming weeks, particularly given
worsened risk appetite," BNP Paribas said in a client note.
"On the currency side, the 1.516-1.520 resistance area on
dollar/lira remains intact while 1.49 should constitute a
support level."
Meanwhile, the cost of insuring Lithuanian sovereign debt
eased a day after Standard & Poor's (S&P) removed the Baltic
economy from its CreditWatch negative position, which had
suggested an imminent ratings downgrade. [].
S&P affirmed Lithuania's 'BBB' credit rating, citing the
government's commitment to address worsening public finances.
Five-year credit default swaps to protect against the
default or restructuring of Lithuanian sovereign debt was quoted
at 372.5 bps, down from 380.7 bps, according to CMA DataVision.
(Additional reporting by Carolyn Cohn in London and Gordon
Bell in South Africa; Editing by Lin Noueihed)
