LONDON: Emerging stocks fell on Wednesday and currencies were mixed as investors focused on a sombre economic outlook, but Russian assets were higher on hopes that relations between Moscow and the west could thaw following the Paris attacks.
The rouble strengthened against the dollar for the third straight day, rising 0.6 percent, with dollar denominated stocks jumping 2 percent to their highest in almost two weeks and rouble shares gaining 1 percent.
Investors were betting improved relations between Moscow and western nations could help the two sides resolve differences over the conflict in Ukraine. On Tuesday, Russian President Vladimir Putin ordered his armed forces to step up strikes against Islamic State together with France, following Friday's attacks in Paris by Islamic State militants.
"Following the weekend attacks...the Western world stance towards Putin is changing," said one broker. "The European Union and the U.S. are now ready to listen - that's the piece of news now."
Oil prices soaring as much as 2.5 percent also lifted Russian assets.
Elsewhere the picture was gloomier. MSCI's emerging market benchmark lost 0.3 percent with bourses in mainland China and other parts of Asia closing some 1 percent lower as investors concerned about the health of the global economy opting to take profits. Stocks in South Africa matched the losses.
"This story of a possible Fed hike, combined with weakening China growth, remains the backdrop, that is the fundamental driver over the next 6-12 months from which equities, FX, local currencies and bonds cannot escape," said Simon Quijano-Evans, chief emerging markets strategist at Commerzbank.
Minutes from the latest Federal Reserve policy meeting to be published later on Wednesday were seen underpinning expectations of a U.S. interest rate hike in December.
In South Africa, the rand strengthened 0.4 percent against the dollar, edging further away from the record low hit earlier in the week. Yet markets are divided over whether South Africa's Reserve Bank will leave benchmark rates unchanged at a policy meeting on Thursday.
Turkey's bourse and lira were unchanged with Prime Minister Ahmet Davutoglu expected to name his ministers on Wednesday or Thursday with the new cabinet likely to be packed with supporters of President Tayyip Erdogan.
A broadly strong dollar, trading just off 7-month highs, hit commodities, with copper prices falling towards six-year lows. The kwacha of Africa's second largest copper producer Zambia weakened more than 3 percent.
Across central and eastern Europe, currencies traded flat to lower against the euro. Poland's zloty dipped slightly and the share market trimmed losses in response to newly-sworn-in Prime Minister Beata Szydlo first policy speech, in which she focused on planned fiscal and economic reforms.
In Bucharest, investors awaited news from the first meeting of a new technocrat government sworn in on Tuesday.
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