July 9, 2019 / 9:04 AM / 2 months ago

EMERGING MARKETS-Stocks down for third day, FX tepid as eyes turn to Powell

* Stocks fall for third day in a row

* Focus on Powell testimony, Fed minutes

* Korea-Japan trade tensions take toll on Kospi, won

By Sruthi Shankar

July 9 (Reuters) - Emerging-market stocks slipped for a third day on Tuesday after declines by U.S. shares, and most currencies weakened against the dollar as investors looked for clues on the path of U.S. interest rates.

The MSCI’s index of developing-world stocks fell about 0.4%, touching its lowest in nearly two weeks. Stocks dropped in China , Taiwan and South Korea as a brokerage downgrade of Apple Inc hit technology stocks.

Korea’s Kospi led declines after Japanese Industry Minister Hiroshige Seko said Japan was “not thinking at all” about withdrawing restrictions on high-tech exports to South Korea. The Korean won has declined in seven of the past eight sessions.

The row with Japan threatens to disrupt the supply of memory chips and smartphones. A Seoul official said it planned to hold talks with Japan on July 12.

Other currencies moved in tight ranges before Federal Reserve Governor Jerome Powell’s testimony to the U.S. Congress and minutes from the Fed’s latest policy meeting on Wednesday, which may offer clues on where interest rates are headed.

U.S. jobs data on Friday led investors to scale back bets on a 50-basis-point interest rate cut at the Fed meeting later this month. Markets still expect a 25-basis-point cut.

Signs that major central banks would turn dovish as global economic growth slowed have lifted emerging markets assets this year, with the MSCI emerging stock index up about 8%.

“Amid a backdrop of newly dovish central banks globally, low bond yields and a de-escalation in the U.S.-China trade tensions, EM risk assets should continue to attract global investors in 2H19, after a surge in flows in June,” emerging market strategists from UBS wrote in a note.

The Turkish lira stabilised after falling 2% on Monday, when the sacking of the country’s central bank chief raised concerns about its independence.

President Tayyip Erdogan’s AK Party proposed changes on Monday to bring down the central bank’s legal reserves ratios to 10% of profits from current 20%.

The Malaysian ringgit held steady as its central bank kept its key interest rate at 3.00%, as expected. It continues to assess growth prospects and potential risks from the U.S.-China trade war.

In eastern Europe, the Hungarian forint slipped against the euro after data showed inflation slowed more than expected in June.

Investors are awaiting a vote on Brazil’s pension reform bill at the lower house of Congress on Tuesday. Optimism around the progress on reforms have helped the main Bovespa stock index hit a record high and the real trade at three-month highs.

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 (Reporting by Sruthi Shankar in Bengaluru, editing by Larry King)

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