Emerging markets stagnant; flows frozen; Russia hosts gas exporters; Latvia gets standby IMF loan

By Aaron Hochman-Zimmerman

New York, Dec. 23 - Emerging market credit lethargically dragged along ahead of an early close for the bond market on Christmas Eve.

News hit the wires, particularly from emerging Europe, but few felt the inspiration for any buying or selling.

In the Commonwealth of Independent States, Russia hosted a summit of gas exporters as market watchers debated over how much of a price-fixing cartel will or will not be formed.

Meanwhile, Latvia was approved for a $2.35 billion standby arrangement from the International Monetary Fund.

Still, investors had little interest in moving the markets before their Christmas and New Year's holidays.

Elsewhere, equities sank on Tuesday, as volatility crept higher by 0.46 to end at 45.02, according to the VIX index. The index is a frequently used gauge of market volatility.

Feet up in emerging Europe

In emerging European trading there was very little action to handle for the traders who had their feet up on their desks waiting for Christmas to arrive, as one London-based trader described the scene.

Meanwhile in Russia, the government hosted 23 gas exporting nations at the Gas Exporting Countries Forum in Moscow, according to reports.

Delegations from around the world insisted that, although the group may look like a newer OPEC, "It's not a cartel. We are defending the interests of our countries, that's all," said Venezuela's energy minister, Rafael Ramirez.

The group denied it intends to impose price fixing, but prime minister Vladimir Putin stated: "the era of cheap energy resources, of cheap gas, is of course coming to an end."

Representatives of Indonesia, Iran, Nigeria and the United Arab Emirates attended, among others.

Light sweet crude was seen trading as low as $38 per barrel.

Also, Turkey expects lower gas prices by at least 10% beginning in 2009 after sharp increases in 2008, the Hurriyet Daily News reported.

Over the course of the year, prices for private users increased by 72.7% and commercial users suffered a 74.9% increase, the report said.

Now, the slightly improving lira and falling commodity prices will allow for the reduction in prices.

The lira was seen trading at 1.519 to the dollar.

Poland cuts rates 75 bps

Meanwhile, Poland cut its key interest rate by a greater-than-expected 75 bps to 5%.

The easing came as "the economic growth in Poland has been slowing considerably," a statement from the central bank said.

"The easing of monetary policy should contribute to stabilizing economic growth around potential output growth, which, in the medium term, will support the achievement of the inflation target," the statement continued.

The zloty was seen trading at 2.944 to the dollar.

Latvia gets $2.35 billion IMF loan

It will be a merrier Christmas in Latvia as the International Monetary Fund approved a $2.35 billion standby loan for the Baltic nation, according to an IMF statement.

The standby arrangement will fulfill more than 20% of the country's financing needs for 2009 to 2011, the statement said.

The European Union, the European Bank for Reconstruction and Development and the World Bank, among others, will also contribute to Latvia's "severe economic challenges," the IMF said.

"Pressures on liquidity and on international reserves are intense, in part caused by the global financial crisis," said the IMF's managing director and chairman, Dominique Strauss-Kahn.

"These pressures have come at a time of growing concern over the sustainability of Latvia's external debt and increasing vulnerabilities associated with the unsustainable credit and growth boom that followed Latvia's accession to the E.U.," Strauss-Kahn said.

The lat was seen trading at 0.504 to the dollar.

LatAm frozen

Latin American trading was frozen as investors were much more interested in holiday plans than work on Tuesday.

In Argentina, president Cristina Kircher eased off taxes on corn and wheat exports in order to prime the grain export pump, the Buenos Aires Herald reported.

Notably missing from the tax cut was soy, which had been a large part of the summer's farm strikes and ultimate stand-off with the government.

Crops such as soy and sunflowers "are still profitable," said agriculture secretary Carlos Cheppi, in the report.

In Brazil, president Luiz Inacio Lula da Silva signed a $12 billion arms deal with French president Nicolas Sarkozy.

Five submarines and 50 helicopters will now carry Brazilian colors in order to preserve Brazil's status as "an important element for the stability of the world," Sarkozy said.

Lula also indicated that the technology gained from such as sale may one day lead to Brazil's own defense industry.

Asia silent, Philippines reports data

Asia remained silent the day before Christmas Eve.

Still, in the Philippines, the balance of payments posted a $394 million deficit for the third quarter, according to a statement from the central bank.

Despite the loss, the yearly balance-of-payment total through September 2008 is a $1.5 billion surplus, the statement said.

"Just like other emerging economies, the country experienced the adverse effects of the global financial crisis, the economic downturn in advanced economies and the continued high international crude oil prices (reaching its peak in July)," the statement said.

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