* Central, E. European FX rebounds after last week's losses
* Emerging stocks rise 2 percent, debt spreads narrow 5 bps
* Dubai CDS narrow 200 basis points on UAE bond programme
By Martina Fuchs
LONDON, Feb 23 (Reuters) - Emerging assets rebounded on
Monday, recouping some of last week's losses, as global risk
appetite returned on news the U.S. government could raise its
stake in Citigroup <C.N>.
A report in the Wall Street Journal said the U.S. government
could own as much as 40 percent of the bank's common equity.
[] The news, which calmed fears of a full
nationalisation of the stricken lender, triggered a rally in
risk trades such as dollar/yen, which hit a three-month high.
Central and eastern European currencies recovered a little
after taking a hammering last week from worries about the
region's exposure to foreign debt and bank lending.
"Emerging currencies are in a retracement phase, we have a
return of risk appetite. It's a reflection of global sentiment
rather than local news, you can see it in the dollar/yen move,"
said Murat Toprak, currency strategist at Societe Generale.
The Hungarian forint rose 1.46 percent against the euro
<EURHUF=> from Friday's U.S. close, leading the trend higher,
while the Czech crown <EURCZK=> and the Polish zloty <EURPLN=>
were up 0.46 and 0.60 percent respectively.
The Hungarian central bank is expected to mark a pause in
its monetary easing policy and keep rates on hold at 9.5 percent
later on Monday. []
But Toprak said the slight recovery in emerging European
assets would not reverse the current negative trend in the
region's markets.
"The main problems of financing in emerging Europe remain
intact. There are large financing needs and large capital
inflows drying up," he said.
The benchmark emerging equities index <.MSCIEF> was up 1.83
percent at 1030 GMT, after hitting three-month lows on Friday.
The index is now down 9.76 percent on the year.
Russia's financial markets were closed on Monday for a
public holiday to honour its war veterans.
Israeli equities <> traded higher, as the first
post-election talks between political rivals Benjamin Netanyahu
and Tzipi Livni increased optimism on achieving a unity
government. []
Emerging sovereign debt spreads <11EMJ> were 5 basis points
narrower at 657 bps over U.S. Treasuries, reflecting a decrease
in risk aversion.
The cost of insuring Dubai's debt in the credit default swap
market fell sharply after the emirate launched a $20 billion
bond programme and said it would sell at least $10 billion in
bonds to the United Arab Emirates central bank, in a move to
remove default risk. []
"This will eliminate uncertainty," said Marios Maratheftis,
regional head of research at Standard Chartered Bank in Dubai.
"It marks a one-country approach and doesn't leave any
questions about Dubai's ability to refinance its debts for 2009
and next year."
Dubai's five-year credit default swaps dropped 200 basis
points to 750 bps on the news, meaning it would cost about
$750,000 a year to cover $10 million of five-year debt.
Latvia's five-year CDS were quoted 15 basis points lower at
938.3 bps, after rising sharply on Friday, as the crisis-hit
country seeks a new government. []
(Additional reporting by Carolyn Cohn in London and Daliah
Merzaban in Dubai; Editing by Ruth Pitchford)
