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 The bold move even managed to overshadow the U.S. Federal Reserve's
meeting at which it is widely expected to trim its asset buying
program by another $10 billion a month. <TOP/CEN>
S&P 500 e-mini futures climbed 0.5 percent and Japan's Nikkei
<.N225> jumped 1.7 percent as safe havens such as the yen and gold
all eased. MSCI's broadest index of Asia-Pacific shares outside
Japan <.MIAPJ0000PUS> bounced 0.5 percent after three sessions of
falls.
Turkey followed India by tightening policy at a midnight meeting of
its central bank, with a huge hike of 425 basis points taking the
overnight lending rate all the way to 12 percent.
"Desperate times call for desperate measures, this is a
confidence-saving measure," said Gennadiy Goldberg, an interest rate
strategist at TD Securities in New York.
"It will definitely hurt but it might be enough to stem the
bleeding. It looks like the lira acted positively, whether it lasts
is anyone's question."
Early signs were that it might be enough to stem the rout in the
Turkish lira which surged to 2.1870 per dollar, and away from
Monday's historic low of 2.39. Turnover was very high for Asian
hours, where the currency is rarely traded.
More emerging market central banks are expected to take steps to
quell a mix of inflationary pressures at home and a flight of
capital abroad. South Africa's central bank holds its policy meeting
on Wednesday.
FED STILL AHEAD
Just the prospect of action had helped stabilize stock markets
across the globe after several days of hectic selling. The MSCI
emerging equity index <.MSCIEF> edged up 0.4 percent from a 4-1/2
month low.
On Wall Street, the Dow <.DJI> ended Tuesday with gains of 0.57
percent, while the S&P 500 <.SPX> rose 0.61 percent.
The calmer tone was reflected in the market's favored measure of
volatility, the VIX index, which <.VIX> dropped over 9.0 percent on
Tuesday to 15.80 and off a peak of 18.99.
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Currencies leveraged to commodity prices and global economic growth
benefited from the better mood. Also helping was surprising strength
in industrial production in South Korea, an antidote to recent
softness in Chinese data.
The Australian dollar rose a third of a U.S. cent to $0.8800 in the
wake of the news from Turkey. The Aussie is often used as a proxy
for hedging against stress in less liquid emerging markets.
Currencies from South Korea to Indonesia and Malaysia all started
firmer.
Going the other way, the safe-haven yen gave up some of its recent
gains as the dollar advanced to 103.25 yen from a seven-week trough
of 101.71 touched at the start of the week.
Emerging markets could still be vulnerable to whatever the Fed
decides on policy. The reduction of U.S. stimulus, combined with the
resulting higher bond yields, is one reason funds have been
switching money back to the developed world.
Yet many investors seem to have made peace with a steady pullback in
asset-buying given it is balanced with a commitment to keeping rates
near zero for a long time to come.
Benchmark 10-year Treasury yields, for instance,
have steadied at 2.77 percent compared to a peak of 3.04 percent at
the start of the month.
In commodity markets, gold lapsed to $1,252.70 an ounce to be well
off Monday's high of $1,278.01.
U.S. crude edged back 29 cents to $97.12 having hit its highest so
far this year on expectations that supplies were dwindling at the
contract's benchmark delivery point. Brent crude had added 76 cents
to $107.45 a barrel on Tuesday.
(Reporting by Wayne Cole; editing by
Eric Meijer)
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