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Shares resilient amid more fears for emerging markets

Shares resilient amid more fears for emerging markets

Share markets held firm for a third day, even as renowned fund manager Mark Mobius warned of ‘a lot more selling’ in troubled emerging markets and traders questioned whether recent gains merely represented a 'dead cat bounce'.

Following Thursday’s strong rally across Europe, the US and then Asia overnight, Britain’s FTSE 100 was little moved at 6,560, while the Euro Stoxx 50 was down 0.1% and Germany’s Dax was flat.

The lack of a strong market direction is typical of the morning before monthly US labour market data, which is used as a key barometer for the future of US monetary policy.

Some 180,000 workers were probably added to the US economy in January, according to polls of economists, after a particularly small 74,000 gain in December. The unemployment rate was likely unchanged at 6.7%, according to the consensus forecast.

Yesterday, a report showing US claims for unemployment benefits declined last week helped the mood on equity markets. A lack of further stimulus action from the European Central Bank, concluding its monthly policy meeting, failed to dent investor sentiment.

The stock market’s resilience over the past three days comes in sharp contrast to the harsh selling of the preceding two weeks, mostly a result of concerns over the strength of emerging markets amid the 'tapering' of US stimulus.

There’s more to come though, warned Mark Mobius, a veteran investor in emerging markets who normally talks of bargains and buying opportunities at times of crisis.

‘The negative sentiment is pretty much in place so you can expect a lot more selling,’ Mobius, who runs funds including Templeton Emerging Markets, told Bloomberg News.

‘We are looking but actually not buying at this stage. Prices can come down or take time to stabilise,’ he added.

Traders questioned whether the recent stock market gains merely represented a short-lived spout of bargain hunting. 'Equities have had a nice bounce over the last few days but traders will need to see how the jobs and unemployment data comes in to determine if it’s a genuine turn around in sentiment or just a dead cat bounce,' said Jonathan Sudaria of Capital Spreads.

In currency markets the euro let slip some of yesterday’s gains – which had been triggered by the European Central Bank’s decision not to cut interest rates – to fall 0.3% to $1.3553.

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Mark Mobius
Mark Mobius
52/55 in Equity - Asia Pacific Excluding Japan (Performance over 3 years) Average Total Return: -6.34%
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