April 4, 2019 / 8:30 AM / 3 months ago

EMERGING MARKETS-Emerging shares retreat as markets await more clues on U.S.-China talks

* MSCI EM index breaks five-day rally

* China stocks end higher, cap fall in EM index

* Indian rupee down 0.9 pct after RBI cuts rates

* S.African rand weaker as government mulls more Eskom support

By Susan Mathew

April 4 (Reuters) - Emerging market shares retreated from near eight month highs on Thursday, and developing market currencies mostly weakened against a soft dollar as markets await more concrete evidence of progress in U.S.-China trade talks.

MSCI’s index of emerging market shares fell 0.2 percent, breaking a five-day winning streak that was supported by receding fears of a global economic slowdown and positive news from trade negotiations between the world’s two largest economies.

But, the absence of any new headlines on the trade front and disappointing U.S. economic data overnight stalled the rally, and focus shifted to U.S. employment data due later in the global day.

“Investors are not leaning on their ‘buy all’ button just yet,” said Stephen Innes, head of trading and market strategy at SPI Asset Management.

Innes added that since the U.S.-China trade dispute is the strongest headwind for the markets to tackle, it will continue to provide a substantial boost to investor sentiment only if both sides can agree on the final pieces of this intricate puzzle.

While shares in Hong Kong fell 0.1 percent and those in India shares were little changed, strong gains in mainland China equities limited declines on the broader EM stocks benchmark.

Russian and South African shares slipped more than 0.15 percent each, while Turkey stocks ticked 0.6 percent higher.

Among currencies of developing economies, while most weakened, India’s rupee underperformed the most among the commonly watched currencies, down 0.9 percent.

The currency was on course to clock its biggest one-day loss in almost four months, deepening losses from earlier in the session, after the country’s central bank cut the key interest rate by 25 basis points to 6 percent, as expected.

The Reserve Bank of India highlighted the need to boost domestic growth due to headwinds “on the global front”. As general elections loom, the underperforming economy could hamper Prime Minister Narendra Modi’s prospects of getting re-elected for a second term.

South Africa’s rand dipped 0.4 percent after Public Enterprises Minister Pravin Gordhan said the highest levels of government were discussing another support package for highly indebted utility Eskom, on top of the 69 billion rand ($4.87 billion) bailout granted in February.

The Turkish lira continued its slide amid rising diplomatic tensions with the United States and looming uncertainty after local elections. The currency has lost more than 6 percent so far this year, with investors worried about a possible repeat of last year’s near 30 percent slide.

For GRAPHIC on emerging market FX performance 2019, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance 2019, see tmsnrt.rs/2OusNdX

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see ($1 = 14.1741 rand) (Reporting by Susan Mathew in Bengaluru Editing by Raissa Kasolowsky)

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