May 14, 2020 / 8:33 AM / 14 days ago

EMERGING MARKETS-Stocks suffer amid signs of prolonged economic distress

* MSCI EM index down 1%; biggest one-day fall in a week

* Fed Chair warns of an “extended period” of weak economic growth

* Dollar rises as Fed dismisses negative U.S. interest rates

* Most Asian FX decline; rising oil prices buoy Russian rouble

* Turkish lira up about 4% from record low

By Susan Mathew

May 14 (Reuters) - Emerging-market stocks fell on Thursday on signs a coronvirus-fuelled global recession would last longer than feared, while most currencies weakened after U.S. Federal Reserve Chair Jerome Powell played down the possibility of negative interest rates.

In Asia, Hong Kong shares dropped 1.3%, while China’s mainland stocks fell 1%. Indian stocks wiped out almost all gains from their stimulus- induced 2% jump on Wednesday.

MSCI’s index of emerging-market shares fell 1%, its steepest decline in a week, as markets from Russia through Africa also traded in the red.

The Fed downplayed the prospect of a swift recovery from the economic effects of the coronavirus and quelled any speculation that it would adopt negative interest rates to combat the downturn.

“Powell’s comments sent a reminder to equity bulls that the economy cannot be turned on by a switch and when it begins to recover, it may be more gradual than hoped,” said Hussein Sayed, chief market strategist at FXTM.

“Meanwhile, for the recovery to start, we still need to win the fight against the virus and there is no indication we are there yet.”

The rising number of COVID-19 infections in countries such as China, South Korea, where the disease was thought to have peaked, and a surging number of daily new cases in Germany, Russia, India and Brazil, among others, has forced the World Health Organization to say the disease may have to be viewed as an endemic that is here to stay.

While most Asian currencies declined against a dollar nearing three-week highs, Russia’s rouble strengthened 0.3% as crude prices rose.

Turkey’s lira extended gains for a sixth straight session, having now climbed more than 4% since reaching a record low a week ago.

Data on Thursday showed Turkey’s industrial output fell more than expected in March due to the impact of the pandemic, ending a run of six consecutive rises as the country recovered from recession.

South Africa’s rand fall 0.5%. President Cyril Ramaphosa said late on Wednesday the country would look to ease coronavirus restrictions cautiously further by end-May.

Emerging-market economies such as South Africa, Russia and most of Latin America are commodity-rich, which has seen them underperform peers this year as prices have dropped.

But the second half of 2020 should see an uptick in commodity prices, which could see their assets outperform those in Asia, economists at Capital Economics said, especially if U.S.-China tensions continue to escalate before the U.S. presidential elections in November.

For GRAPHIC on emerging market FX performance 2020, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance 2020, 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 Susan Mathew in Bengaluru; editing by Larry King)

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