LONDON, June 16 (Reuters) - Emerging market stocks were heading for their biggest weekly fall of the year on Friday, though Russia, one of the biggest losers of the week, steadied along with oil prices.
Russian stocks rose 0.6 percent off Thursday’s 16-month lows, but are down 3 percent so far this week, their worst weekly performance since mid-April.
The rouble also firmed 0.2 percent against the dollar after dipping to one-month lows on Thursday, but was down over 1 percent this week.
The sell-off was triggered by U.S. lawmakers moving to impose new sanctions on Russia and force President Donald Trump to get the approval of Congress before easing any existing sanctions.
Oil’s price fall to six-month lows compounded Russia’s woes.
But as oil edged higher on Friday, the rouble found a floor, ahead of a Russian central bank meeting which is expected to cut interest rates by 50 basis points.
“The reason we expect a 50 bps cut is inflation fell to their target in May, and so far signs from the first quarter are that domestic demand is still soft and they have room to cut,” said Kiran Kowshik, a strategist at UniCredit.
“But it’s possible they could do 25 bps given how oil is trading,” he said, adding that either outcome was fine for the rouble due to the pace of disinflation.
MSCI’s emerging markets stocks index was steady near three-week lows hit on Thursday with gains in some European markets such as Hungary and Poland offsetting earlier losses in Asia.
Chinese mainland shares fell 0.3 percent, ending the week down 1.6 percent, the first weekly fall since early May as weak producer inflation and investment data have reinforced concerns of a renewed slowdown in the world’s No.2 economy.
The yuan was set for its worst week since early-March, after the central bank fixed its official guidance sharply lower.
Hong Kong stocks closed slightly up but have lost 1.6 percent for the week, their biggest fall in three months.
Kowshik said that as fiscal stimulus promised by U.S. President Donald Trump had been delayed, there had been some selling in emerging assets that would have benefited from such extra spending.
He cited South Korea, where the won fell as much as 1.2 percent before the central bank was suspected of intervening. The won ended at five-week lows.
U.S. Federal Reserve signals that it may begin reducing its holdings of bonds and other securities this year is also a negative for emerging markets
“The bad news for emerging markets is the Fed tapering announcement, which many people were not expecting this week,” Kowshik said. “It suggests there is a limit to how much U.S. yields can fall.”
The Turkish lira weakened 0.2 percent against the dollar. The central bank left its key interest rate on hold on Thursday, despite high inflation.
South Africa was closed for a public holiday but stocks ended the week down almost 3 percent, their worst performance since December.
Mining stocks sold off hard on Thursday when the government revamped the sector’s ownership rules.
In central Europe, the Romanian leu reached a near five-year low against the euro after the ruling coalition said it would seek to topple Prime Minister Sorin Grindeanu next week.
But the Serbian dinar hovered near a 17-month high hit on Thursday after the president nominated Ana Brnabic as the country's first woman prime minister. She is not affiliated with any party. For GRAPHIC on emerging market FX performance 2017, see tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2017, see tmsnrt.rs/2dZbdP5
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg
Morgan Stanley Emrg Mkt Indx 1003.66 +0.02 +0.00 +16.40
Czech Rep 1000.82 +4.08 +0.41 +8.59
Poland 2302.66 +6.67 +0.29 +18.21
Hungary 35692.03 +157.53 +0.44 +11.53
Romania 8427.80 +21.51 +0.26 +18.95
Greece 809.47 +9.74 +1.22 +25.76
Russia 998.64 +6.68 +0.67 -13.34
South Africa 44512.15 -572.71 -1.27 +1.39
Turkey 98766.28 +29.26 +0.03 +26.40
China 3122.86 -9.62 -0.31 +0.62
India 31119.49 +43.76 +0.14 +16.87
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 26.21 26.24 +0.10 +3.03
Poland 4.22 4.23 +0.24 +4.39
Hungary 307.63 307.79 +0.05 +0.39
Romania 4.58 4.58 +0.08 -0.97
Serbia 121.97 122.07 +0.08 +1.13
Russia 57.74 57.85 +0.19 +6.11
Kazakhstan 320.26 317.86 -0.75 +4.18
Ukraine 26.02 26.01 -0.04 +3.77
South Africa 12.83 12.86 +0.25 +7.00
Kenya 103.45 103.30 -0.14 -1.04
Israel 3.53 3.53 -0.04 +9.19
Turkey 3.52 3.51 -0.16 +0.26
China 6.81 6.81 -0.11 +1.89
India 64.49 64.54 +0.09 +5.36
Brazil 3.27 3.27 +0.00 -0.64
Mexico 17.99 18.05 +0.33 +15.17
Debt Index Strip Spd Chg %Rtn Index
Sov‘gn Debt EMBIG 321 -1 .01 7 90.67 1
Additional reporting by Sujata Rao: editing by Elaine Hardcastle