Markets hit by increased investor risk aversion (Aug 07)

The troubles in US credit markets prompted a sell-off in Emerging Europe assets last month. Equity markets initially fell by around 2-7%, currencies by 2-5% and bond spreads rose by around 40bps as investor risk aversion increased. Those countries with the largest current account deficits were generally hit the hardest. Most notably, the Turkish lira dropped by 5% and the equity market fell by 7% although part of these losses have since been reversed.