LONDON: Eastern Europe was helping to support emerging market stocks on Wednesday, as heightened tension between Ankara and Moscow over Syria pushed Turkish bond yields to four-and-half-month highs.
MSCI's 23-emerging country equity index was back to almost flat by 1000 GMT as a 1.8 percent jump in its eastern Europe markets helped offset falls in Nigeria and some parts of Asia overnight.
Chinese mainland shares ended up around one percent
at three-week highs after the government unveiled plans to invest some 400 billion yuan in infrastructure.
But Hong Kong closed down over one percent and some of the Gulf bourses were in the red as excitement about Tuesday's deal to freeze oil production faded.
"At the moment the market is just trying to figure what the next step will be," said Cristian Maggio, head of emerging markets strategy at T.D. Securities.
"It is still too early to say whether it is a stable return of risk appetite, I would be more inclined to say no rather than yes."
Emerging market stocks have jumped almost 3 percent since the start of the week and over 6 percent in the last month, but worries about China and global growth generally are still being amplified by political tensions.
The yield on Turkey's sovereign dollar bonds rose 10 basis points (bps) to 351 bps on Wednesday, the highest since September 2015, over fears the country is being dragged deeper into the war in neighbouring Syria.
The lira firmed slightly, however, but remained near two-and-a-half week lows as a dispute with Russia over military action in Syria intensified again, just months after a Russian fighter jet was shot down.
"The lira has come under a bit of pressure but it hasn't done too badly," said William Jackson, senior emerging markets economist at Capital Economics. "There's a concern that if tensions were to escalate significantly between Russia and Turkey we could see a sharper sell off."
The Russian rouble was 1.5 percent firmer against the dollar, mainly due to local exporters converting foreign currency reserves to pay monthly taxes, and a move upwards in crude oil prices.
Ukrainian dollar bonds also made minor progress after its parliamenrt rejected a no confidence motion on Tuesday . Analysts warned though that the likelihood of the coalition breaking down had increased and it would be difficult for the government to get support for unpopular reforms.
"There is still a lot of uncertainty around what is going to happen. In this environment there's a risk of fresh elections being called, and a shift to more populist, anti-austerity, anti-IMF parties," said Jackson.
Elsewhere, the South African rand weakened 0.2 percent against the dollar following a rise in consumer inflation to 6.2 percent year-on-year in January, and comments from Moody's on Tuesday that drought was pushing the country to the brink of recession.
Asian currencies had also continued to struggle, with the Korean won still at five-and-a-half-year lows even as FX intervention suspicious were aroused as the country's deputy finance minister warned of firm action.
Back in stronger performing eastern Europe, the Polish zloty firmed 0.4 percent against the euro ahead of January industrial output figures out later on Wednesday.
A newly-appointed central banker said the almost completely overhauled rate-setting panel would be cautious with any policy moves, dampening worries that another major round of rate cuts was imminent.
Late on Tuesday, there was more positive news for Argentina as reached a deal with bondholders covered by a U.S. class action lawsuit over defaulted debt.
It was a different story for Colombia as Standard & Poor's revised its BBB sovereign credit rating outlook to negative from stable, citing the weak global oil prices.
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