* MSCI’s EM index down 1.8% after four days of gains
* UBS analysts see EM shares outperforming developed equities
* Turkish lira up 0.5% as Ankara, Moscow agree to Syria truce
* S.African rand up after losing 2% on Thursday
By Susan Mathew
March 6 (Reuters) - Emerging market stocks fell on Friday, on track to end a four-session rally, as the aggressive spread of the coronavirus threatened to deepen a global economic downturn.
Major stock indexes across the EM universe lost between 0.5% and 3.3% as of 0840 GMT as investors questioned if policy stimulus would be enough to arrest the economic damage from the epidemic, which continues to spread rapidly outside China.
Italy this week announced the closure of all schools and universities for two weeks, while California declared a state of emergency to limit the spread of the virus which has infected more than 98,000 people globally and caused over 3,300 deaths.
“Markets are struggling to balance the competing forces of more extensive COVID-19 containment measures, and of monetary and fiscal stimulus... (which) means that in the near term we expect market volatility to persist,” said Mark Haefele, Chief Investment Officer at UBS Global Wealth Management.
MSCI’s index of emerging market stocks slipped 1.8% on Friday, though it was poised for weekly gains of about 1.5%.
UBS analysts said EM shares have been outperforming developed market equities in recent days, given China’s success in containing the outbreak. They expect this strength to continue in the weeks ahead on lower EM equity valuations, and additional tailwinds from lower rates and a weaker dollar.
Rising expectations that the U.S. Federal Reserve would deliver another rate cut later this month left the dollar index , which measures the greenback’s strength against a basket of six major currencies, languishing at two-month lows.
That supported some currencies in the developing world.
Turkey’s lira rose 0.5% as Ankara and Moscow agreed to a ceasefire deal in Syria’s Idlib region after a recent surge in tensions raised the prospect of a direct clash between Russia and Turkey.
Russia and Turkey back opposing sides in Syria’s nine-year conflict, with Moscow supporting President Bashar al-Assad and Turkey backing some rebel groups. Several previous deals to end the fighting in Idlib have collapsed.
The issue has steadily pressured the lira, outweighing a spate of recent economic data that pointed to a pick up in Turkey’s economy.
Russia’s rouble traded about 0.2% higher. With OPEC ramping up pressure for an oil output cut to stabilize prices, all eyes are now on the OPEC+ meeting at Vienna on Friday.
Russia and Kazakhstan, both members of the broader OPEC+, said they had not yet agreed to a deeper cut, raising the risk of a collapse in cooperation that has propped up crude prices since 2016.
South Africa’s rand rose 0.4%. The currency lost almost 2% in the last session after the country confirmed its first case of the coronavirus.
President Cyril Ramaphosa said the spread would have a huge impact on travel and a negative impact on the already struggling South African economy.
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For RUSSIAN market report, see (Reporting by Susan Mathew in Bengaluru; Editing by Devika Syamnath)