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EMERGING MARKETS-Hawkish Fed, lower commodities weigh on emerging stocks, FX
May 4, 2017 / 9:18 AM / in 3 months

EMERGING MARKETS-Hawkish Fed, lower commodities weigh on emerging stocks, FX

7 Min Read

    By Karin Strohecker
    LONDON, May 4 (Reuters) - Hawkish tones from the U.S.
Federal Reserve, easing commodity prices and lacklustre Chinese
data weighed on emerging market assets on Thursday with stocks
extending losses for a second day and currencies weakening.
    MSCI's emerging market index           fell 0.3 percent as
bourses in much of Asia                       and Turkey
         lost ground. Stocks in China                   closed
at a three-month low after a survey showed activity in services
sector grew at its slowest in almost a year in April, raising
concerns over economic risks.             
    The losses came after the Fed kept its benchmark interest
rate steady as expected on Wednesday though downplayed weak
first-quarter economic growth, emphasising labour market
strength and signalling it was still on track for two more rate
rises this year.             
    Yet investors expected this to be a temporary soft patch for
many emerging assets, with markets closely watching key U.S.
employment data out on Friday to show solid increases. 
    "U.S. dollar and U.S. Treasury yields (are) up post-FOMC but
not convincingly so with futures almost 'fully' pricing in a
June hike, leaving emerging market assets in a benign space of
their own," said Simon Quijano-Evans, emerging market strategist
at Legal & General Investment Management. 
    Russian stocks                bounced back from the previous
days heavy losses when shares in Sistema           collapsed
after oil major Rosneft           filed a $1.9 billion lawsuit
against the business conglomerate. Sistema shares gained nearly
10 percent on Thursday.
    South Korean stocks         hit a record high on robust
exports, upbeat earnings and rising hopes for economic stimulus
as the presidential election approaches.             
    However, the dollar        extending the previous session's
gains, crude oil prices                trading near their
weakest since late March and copper teetering near a four-month
low weighed on currencies.                 
    South Africa's rand        fell 0.6 percent to its weakest
in three weeks as data showed private sector activity contracted
for the first time in nine months in April as new export orders
continued to decline and growth remained marginal in Africa's
most industrialised economy.             
    Russia's rouble        nearly matched those falls, weakening
for a fourth straight session, while Turkey's lira       
slipped 0.2 percent. 
    In the Czech Republic, central bank policymakers were
expected keep interest rates unchanged until 2018 as they
concluded their first meeting since they lifted the cap on the
Czech crown.              
    "While no one expects the Bank to hike rates, the focus will
be on the CNB's thinking on real economy developments, strength
in the labour market in particular, and the fact that the exit
from the FX regime has so far not resulted in a pronounced crown
appreciation," Nomura's Henrik Gullberg wrote in a note to
clients. 
    A Reuters poll showed that analysts expected the Czech crown
to gain more than 4 percent against the euro in the coming year,
lifted by economic growth and anticipated monetary tightening
while shrugging off political uncertainty.             
    Venezuela's dollar-denominated bonds came under pressure as
protests against the government escalated further. Security
forces battled protesters who lit fires and hurled stones on
Wednesday in rage at President Nicolas Maduro's decree to create
an alternative congress, with another fatality taking the death
toll to 34 during a month of unrest.             
                
For GRAPHIC on emerging market FX performance 2017, see tmsnrt.rs/2e7eoml

For GRAPHIC on MSCI emerging index performance 2017, see tmsnrt.rs/2dZbdP5
    
     Emerging Markets Prices from Reuters            
 Equities                  Latest    Net Chg  % Chg  % Chg      
     
                                                     on year    
       
 Morgan Stanley               
 Emrg Mkt Indx              983.27    -2.47   -0.25  +14.03     
       
 Czech Rep                 1002.08    +5.79   +0.58   +8.73     
       
 Poland                    2414.54   +22.45   +0.94  +23.95     
       
 Hungary                  32175.99   +98.27   +0.31   +0.54     
       
 Romania                   8238.22   +28.34   +0.35  +16.28     
       
 Greece                     754.32    +5.71   +0.76  +17.20     
       
 Russia                    1100.03    +3.68   +0.34   -4.54     
       
 South Africa             47005.63   +87.74   +0.19   +7.07     
       
 Turkey                   93587.82  -274.91   -0.29  +19.77     
       
 China                     3127.29    -8.06   -0.26   +0.76     
       
 India                    30136.67  +241.87   +0.81  +13.18     
       
            
 Currencies              Latest    Prev    Local    Local       
      
                                   close   currency currency    
       
                                           % change % change    
       
                                                    in 2017     
      
 Czech Rep                26.78     26.74   -0.15    +0.85      
     
 Poland                    4.22      4.20   -0.30    +4.43      
     
 Hungary                 312.17    311.59   -0.19    -1.07      
     
 Romania                   4.54      4.54   +0.02    -0.16      
     
 Serbia                  123.25    123.14   -0.09    +0.08      
     
 Russia                   57.61     57.36   -0.43    +6.34      
     
 Kazakhstan              315.88    315.51   -0.12    +5.63      
     
 Ukraine                  26.47     26.47   -0.00    +2.00      
     
 South Africa             13.50     13.43   -0.49    +1.72      
     
 Kenya                   103.05    103.00   -0.05    -0.66      
     
 Israel                    3.62      3.62   +0.02    +6.47      
     
 Turkey                    3.54      3.53   -0.31    -0.51      
     
 China                     6.90      6.90   +0.02    +0.69      
     
 India                    64.18     64.15   -0.05    +5.86      
     
 Brazil                    3.16      3.16   +0.03    +2.84      
     
 Mexico                   18.91     18.86   -0.27    +9.53      
     
            
 Debt                 Index   Strip Spd  Chg   %Rtn   Index     
       
 Sov'gn Debt          EMBIG   314        -2    .00  7 82.40 1   
        
            
 All data taken from Reuters at 08:53 GMT.            
 Currency percent change calculated from the daily U.S.         
  
 close at 2130 GMT.            

    
    For CENTRAL EUROPE market report, see       
    For TURKISH market report, see      
    For RUSSIAN market report, see         )

 (Reporting by Karin Strohecker)
  

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