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GLOBAL MARKETS-UK rate hike fears recede, emerging markets on edge

Published 06/08/2015, 10:14 pm
Updated 06/08/2015, 10:16 pm
© Reuters.  GLOBAL MARKETS-UK rate hike fears recede, emerging markets on edge
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* UK "Super Thursday" eases rate-hike worries

* U.S. still in spotlight over Fed's own rate policy

* Emerging stocks hit two year low as Asia stocks slip

* Dollar index eases after touching 3 1/2 month high (Updates with Bank of England data)

By Marc Jones

LONDON Aug 6 (Reuters) - Relief rippled through UK markets on Thursday after the Bank of England indicated it was in no hurry to raise interest rates while fears that U.S. rates are set to rise from crisis-era lows continued to hurt emerging markets.

Many investors were keeping moves small ahead of U.S. jobs data on Friday that could give a strong pointer to when the Federal Reserve will raise rates for the first time in nearly a decade. U.S. equity futures SPc1 were up 0.2 percent.

Sterling fell sharply, gilt futures rose and UK stocks got a boost after the British central bank said just one official had voted to raise interest rates at its August meeting. That confounded expectations that at least two members and possibly three of the bank's monetary policy committee would vote for a hike for the first time this year.

Traders said expectations of a rate hike were being pushed back to mid-2016, having earlier this week moved closer to the start of next year.

"The single vote for a rate rise from the monetary policy committee ... offers a small signal that a rate rise is inching closer," said Andrew Wilson, EMEA chief of Goldman Sachs (NYSE:GS) Asset Management. "We think this is likely to be a H1 2016 event rather than a 2015 event."

Sterling fell 0.6 percent against the dollar to $1.5509, having traded at $1.5600 before the BoE's bumper release of data including its interest rate decision, meeting minutes, and new economic forecasts. The euro jumped 0.7 percent to 70.38 pence, having traded at 69.83 pence beforehand.

London's FTSE 100 .FTSE equity index turned positive, up 0.1 percent at 1147 GMT and strongly outperforming a 0.4 percent drop for the pan-European FTSEurofirst 300 index .FTEU3 .

Emerging market stocks meanwhile slipped to their lowest in over two years on nervousness about the timing and scope of a U.S. interest rate hike and continued weakness in commodity markets.

MSCI's benchmark emerging markets index .MSCIEF hit its lowest level since mid-2013 as fresh losses in China, large parts of Asia and Russia once again weighed.

The pressure continued to crank up on Malaysia. The ringgit hit a fresh 17-year low and some local bond prices fell, in a sign of declining confidence among foreign investors in the face of political uncertainty and low commodity prices.

"If weakening pressure on MYR persists, we can definitely not exclude the possibility of FX outflow restriction," said Amy Yuan Zhuang, a senior analyst at Nordea in Singapore.

Elsewhere, the Swiss franc fell to its lowest in five months against the euro, as investors sensed that its central bank may have to ease policy while oil prices hovered near multi-month lows after a surge in gasoline stores in the United States.

Brent futures LCOc1 , the global oil benchmark, hit $49.02 per barrel, its lowest since late January.

London copper CMCU3 rose 0.5 percent as better Chinese data on Wednesday had underpinned industrial metals, although gains were capped by a stronger dollar. Gold XAU= struggled to pull away from a 5-1/2-year low as it hovered at $1,086.20 an ounce.

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