By Sebastian Tong
LONDON, March 4 (Reuters) - The Slovak crown hit a record
high on Tuesday for the fourth session in a row, powered by firm
growth data and revaluation expectations, while emerging shares
were weighed down by persistent fears of a U.S. recession.
Emerging equities <.MSCIEF> eased 0.3 percent in line with
European markets as fresh euro zone data confirmed a growth
slowdown in the region. []
The figures follow Monday's survey of U.S. manufacturers
showing the biggest slump in factory activity in February in
nearly five years. []
Investors are likely to remain on the sidelines ahead of
Friday's release of jobs data in U.S., which will provide
another measure of the health of the world's largest economy.
"One of the big fears is a dramatic fall in U.S.
consumption. The combination of rising unemployment, flat wages
and rising food and oil prices could result in substantially
weaker consumption would could deepen the global slowdown," said
Kasper Bartholdy, Head of Sovereign Strategy at Credit Suisse.
Most emerging currencies were firmer as the dollar <EUR=>
recovered from its record lows against the euro after EU
officials expressed concern over the sharp rise of the single
European currency.
"The consensus right now is to be long emerging markets
currencies because most emerging markets countries have strong
balance of payments and are facing rising inflation. This means
they are more likely to raise interest rates which should be
supportive for their currencies," Bartholdy said.
Emerging sovereign debt spreads <11EMJ> recovered to tighten
3 basis points to 291 bps over Treasuries.
"Debt investors will likely keep a conservative investment
stance over the next trading sessions, and lack of traction on
demand might leave EM debt once again hostage to adverse
fluctuaations on Treasury yields," Commerzbank said in a note.
SLOVAK CROWN, HUNGARIAN BONDS
Slovakia's crown <EURSKK=> hit a new all-time high of 32.312
against the euro before easing to 32.40 at 1100 GMT. The country
reported its fastest economic growth rates ever for its fourth
quarter and full-year 2007. []
On Monday, Standard & Poor's (S&P) raised its outlook on
Slovakia to "positive" from "stable", saying that the country
was on track to join the euro zone in 2009.
Analysts say the crown is likely to strengthen further
before Slovakia reaches an agreement on its currency exchange
rate conversion to the euro by the end of July.
"Because of Slovakia's excellent fundamentals, we will see a
continuance in this pattern of strengthening. We estimate 32
crowns per euro will be central parity," said Anders Svendsen,
an economist at Nordea Capital Markets in Copenhagen.
Meanwhile, Hungarian bond yields, which surged 50 bps points
to three-year highs on Monday, recovered to drop 20 bps as the
government's debt agency said it would cut borrowing this year.
The Hungarian debt market froze up on a rise in yields
prompting the government's move to slash its government bond
sales by 25-30 percent. Traders said Hungarian credit default
swaps had surged some 30 bps in the past week.
The forint pulled back 0.3 percent versus the euro <EURHUF=>
after a firmer open.
"The money market has changed from pricing in rate cuts to
pricing in rate hikes which is why bonds may not seem that
attractive," Nordea's Svendsen said, adding that a 50 bps
interest rate hike can be expected as inflation rises.
-- additional reporting by Sujata Rao in London
(Reporting by Sebastian Tong, editing by David
Christian-Edwards)
