July 16, 2019 / 8:49 AM / 7 months ago

EMERGING MARKETS-EM assets edge higher ahead of U.S. data

July 16 (Reuters) - Emerging markets assets crept higher on Tuesday as investors stayed on the sidelines ahead of U.S. economic data that could provide clues for future monetary policy.

MSCI’s emerging market index tracking equities was marginally higher, lifted by gains in Asian heavyweights Hong Kong, South Korea and Taiwan.

Mainland China shares however, closed lower as investors fretted over slower growth in the world’s second-largest economy and the impact of the Sino-U.S. trade war, even as Beijing ramped up stimulus efforts.

Data showed on Monday that China’s growth had slowed to a 27-year low but industrial and retail figures pointed to signs of stabilisation.

U.S. data later in the day is expected to show that retail sales rose 0.1% in June, according to the median estimate of economists polled by Reuters.

“The outlook for looser monetary policy from central banks and growth holding up in U.S. and China is quite encouraging,” said Graham Stock, senior EM sovereign strategist, BlueBay Asset Management.

While dovish signals from the U.S. Federal Reserve have left little doubt that an interest rate cut is likely later this month, stronger economic indications may push the probability of an “aggressive” cut lower.

“Our expectations was always that we would see a 25bps cut. Think that’s sufficient. Maybe we will see another 25bps cut later but less likely in this cycle,” said Stock.

Currencies in the developing world were mixed. The South Korean won nudged 0.3% higher ahead of a central bank meeting this week, while the yuan was flat.

The Indian rupee slid 0.2%. Data showed on Monday that India’s imports declined to their lowest level in four months in June, down 9% from a year ago, indicating weakening consumption in Asia’s third largest economy.

South Africa’s rand as well as stocks in Johannesburg edged up as investors awaited a monetary policy meeting later this week.

Turkey’s lira was 0.2% lower with President Tayyip Erdogan confirming his intention to press full steam ahead with deploying the Russian S-400 missile system – a possible sanctions trigger with the U.S.

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For RUSSIAN market report, see (Reporting by Agamoni Ghosh in Bengaluru Editing by Andrew Heavens)

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