* Emerging shares rise over 1 percent on oil, Fed
* Russian stocks fall to lowest level since May 2007
* Local currencies weaker as rate expectations adjust
* Romanian leu at 2008 high versus euro
By Sebastian Tong
LONDON, Aug 6 (Reuters) - Emerging stocks rose more than 1
percent on Wednesday off their lowest level in nearly 12 months,
in line with global markets which were cheered by a further
retreat in commodity prices and the Federal Reserve's decision
to leave interest rates unchanged.
Weaker oil prices, however, battered Russian stocks, which
tumbled more than 2.5 percent to their lowest levels since
end-May 2007.
"Slightly lower oil prices might be supportive of emerging
equities, but overall emerging equities deserved to fall out of
bed, because global growth is falling, and domestic demand is
suffering from tighter monetary policy," said Arnab Das, head of
emerging markets research at Dresdner Kleinwort.
The Fed's decision to leave rates steady at 2.0 percent on
Tuesday also soothed investors who feared that the central bank
would be compelled to further raise borrowing costs to combat
rising inflation.
The benchmark emerging equities index <.MSCIEF> was 0.96
percent higher to 1,009.13 by 1038 GMT, recovering after sinking
on Tuesday to their lowest level since last August 2007, while
emerging sovereign debt spreads <11EMJ> tightened 1 basis point
to trade at 281 above U.S. Treasuries.
Oil's nearly 20 percent slide from its mid-July peak on
concerns that a slowing global economy is curbing demand is seen
as good news for commodity-importing emerging economies such as
Turkey and Romania but bad news for oil exporters such as Russia
and Brazil.
Led by oil companies, Russian stocks <> broke below the
key 1,800 mark in early trade but clambered back above that
level to trade 0.11 percent lower.
Russian stocks have remained pressured since last month when
Prime Minister Vladmir Putin attacked blue chip miner Mechel's
<MTL.N> pricing policy, reviving investor fears of Kremlin
interference in corporate dealings.
LEU EXCEPTION
Emerging currencies were mostly weaker as lower oil prices
helped ease inflation fears and lowered investor expectations of
further official interest rate rises.
The Ukrainian hyrvnia <UAH=> was slightly softer by 0.04
percent after consumer prices there were shown to have fallen by
0.5 percent month-on-month in July following a rise of 0.8
percent in June []
The South African <ZAR=> and the Turkish lira <TRY=>, which
have clawed back earlier 2008 losses versus the dollar, were
among the day's biggest losers, slipping 0.83 percent and 0.90
percent respectively.
"A combination of the recent drop in oil prices, the strong
rally in the lira and rand, and dovish comments by the two
central banks has convinced us that both banks will remain on
hold," said Goldman Sachs analyst Ahmet Akarli in a research
note, adding that neither central bank was likely to raise
interest rates further this year.
A national strike on Wednesday was also expected to keep the
rand softer, while a media report of a fresh court attempt to
close Turkey's ruling AK Party was blamed for the lira's
weakness. []
The Hungarian forint <EURHUF=>, which last month rose to
record levels along with its regional peers the Czech crown and
Polish zloty, fell 0.57 percent to its lowest level against the
euro in nearly five weeks on disappointing June industrial
output data which underscored declining domestic and western
European economic demand.
The Czech crown <EURCZK=> edged lower against the euro ahead
of a monetary policy meeting on Thursday while the Polish zloty
<EURPLN=> was 0.91 percent lower.
The Romanian leu proved an exception, rising 0.49 percent to
3.48, its highest level versus the euro this year.
The leu is extending gains from last week when the central
bank unexpectedly hiked interest rates.
(Additional reporting by Peter Apps; Editing by Ruth
Pitchford)
