March 5, 2020 / 10:12 AM / a month ago

EMERGING MARKETS-Wall St rally lifts EM stocks; Putin-Erdogan meeting eyed

* Wall Street jumps overnight on Biden hopes, strong data

* EM stocks up for fourth session running

* Russian, Turkish presidents to meet as tensions rise in Syria

* S.Africa current account deficit narrows sharply

By Susan Mathew

March 5 (Reuters) - Emerging market stocks looked set to gain for a fourth straight session on Thursday as a strong rally on Wall Street and hopes of more monetary stimulus in the face of a fallout from the rapidly-spreading coronavirus supported risk appetite.

Wall Street came back swinging on Wednesday as investors cheered a strong showing for Joe Biden, the front-runner for the Democratic presidential nomination in the United States, and strong U.S. services activity numbers.

The optimism trickled into Asia with MSCI’s index of Asian stocks, excluding Japan, rising above 1%. Stocks in Turkey and South Africa gained between 1.6% and 0.5%, respectively and all together took MCSI’s EM index up 0.8%.

“Risk-on sentiment has returned once again with Wall Street leading a significant rally on Wednesday,” said Hussein Sayed, chief market strategist at FXTM.

“The key question investors are now asking is whether this rally has further room to go.”

Emerging market stocks had rallied last session after the U.S. Federal Reserve delivered an off-schedule 50 basis point cut to help the economy combat the economic fallout from the coronavirus outbreak.

But with the virus rapidly spreading across the globe, many cities have come to a standstill, elevating worries of scale of the economic fallout. Analysts are beginning to question the extent to which monetary and fiscal stimulus will be meaningful.

A slight recovery in the dollar and rising expectations that other central banks may take cues from the Fed put most emerging market currencies on the defensive.

Bank of Canada cut rates by 50 basis points overnight, while in Asia, central banks in Korea and Malaysia cut benchmark rates last week. Brazil’s real touched all-time lows overnight on rising speculation its monetary policy committee would cut rates to a fresh low.

Russian President Vladimir Putin and his Turkish counterpart Tayyip Erdogan are scheduled to meet in Moscow on Thursday after a surge in tensions between their countries over fighting in Syria’s Idlib province between Russian-backed Syrian government forces and rebels allied to Turkey.

Turkey’s lira traded 0.4% lower ahead of the meeting, while Russia’s rouble traded flat to lower against both the dollar and the euro.

Russia’s finance ministry on Wednesday said it would almost halve daily purchases of the currency between March 6 and April 6. This should support the rouble, especially should OPEC+ countries agree on deeper oil output cuts, said Credit Suisse analyst Alexey Pogorelov.

South Africa’s rand slipped 0.5%. Data on Thursday showed South Africa’s current account deficit narrowed to the lowest in nearly a decade to 1.3% of gross domestic product (GDP) in the fourth quarter from 3.7% in the previous three-month period.

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 Ramakrishnan M.)

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