EMERGING MARKETS-Russia leads emerging markets lower after fighting in east Ukraine
By Sujata Rao
LONDON May 27 (Reuters) - Russian stocks slumped 2 percent on Tuesday and the rouble fell from four-month highs, leading broad-based emerging market losses as flaring violence in eastern Ukraine took the edge off optimism fuelled by smooth weekend elections.
The Ukraine vote yielded a clear win for confectionary magnate Petro Poroshenko who has promised to seek a meeting with Putin to establish stability in eastern Ukraine. The smooth election also averts the immediate threat of fresh Western sanctions against Russia.
But pro-Russia rebels have captured Donetsk airport in eastern Ukraine, with up to 40 separatists said to have been killed so far in nearly 24 hours of fighting with Ukrainian forces.
Russian stocks fell 2 percent to one-week lows after posting 0.7 percent gains on Monday. The rouble slipped 0.3 percent, hit by heavy selling of stocks and local bonds.
Regis Chatellier, a strategist at Societe Generale, attributed the falls to foreign investors taking advantage of recent gains to shed their holdings.
"Some funds are trying to move out of Russia and they are selling on strength. People have been waiting to get rid of Russia exposure," Chatellier added.
The stock market was also pressured by Russia's second-largest bank VTB, which reported a 98 percent fall in first-quarter net profit, citing a deterioration in the Ukrainian and Russian economies. VTB shares fell 3.7 percent.
But Ukraine's dollar bonds, mostly traded offshore, rallied to six-week highs. London and New York were closed for a holiday on Monday, which meant traders had to wait until Tuesday to price the victory. Продолжение...