EM stocks, FX steady as markets await Fed; China data disappoints
EM FX flat, stocks down 0.1%
U.S. Federal Reserve rate decision due on Wednesday
Slovakia's credit rating downgraded to A3
By Pranav Kashyap
Dec 16 (Reuters) -Emerging market currencies were little changed on Monday as investors awaited the U.S. Federal Reserve's rate decision this week, while disappointing data from China dented Asian markets.
China's retail sales climbed only 3% year-on-year in November, falling short of the expected 4.6% increase, keeping alive calls for Beijing to ramp up consumer-focused stimulus as policymakers brace for more U.S. trade tariffs under a second Trump administration.
In response, emerging stocks in Asia fell. China's CSI300 .CSI300 declined, closing down 0.5%, and the Shanghai Composite index .SSEC edged lower by 0.2%.
The economic slowdown in China, the world's second-largest economy, has put pressure on emerging market assets this year, despite the Federal Reserve beginning to ease interest rates.
On a medium to long-term basis, emerging markets like Africa "will bear the brunt of any extreme measures that Trump pulls on China", said Charlie Bird, FX trader at Verto.
"China seems to be well invested into Africa and they can't pull it all out overnight. It would probably be a gradual move," Bird added.
The dollar index =USD remained steady at 106.88, with market participants eagerly awaiting the U.S. Federal Reserve's interest rate decision on Wednesday. A 25 basis-point cut is expected, though the focus will be on future guidance into 2025, where a more cautious pace of cuts is anticipated.
According to CME's FedWatch tool, officials are expected to forgo a cut in January, it turn lifting the dollar. FRX/
By 0957 GMT, the MSCI EM equities index .MSCIEF slipped 0.1%, while an index tracking currencies .MIEM00000CUS was flat.
In Europe, Slovakia faced a credit rating downgrade to A3 from Moody's late Friday, citing "broad institutional challenges amid political tensions". However, the outlook was revised to stable.
Slovakia's Finance Ministry criticised the downgrade as a misinterpretation of the political landscape.
Elsewhere, Hungary's forint EURHUF= remained largely unchanged against the euro, with eyes on the central bank's rate decision on Tuesday.
The Budapest SE index .BUX slipped 0.2%, while Poland's benchmark .WIG20 ticked up 0.1%.
Poland's zloty EURPLN= held its ground ahead of the central bank's core inflation data release at 1300 GMT.
In Africa, Senegal projected a budget deficit of around 7% of GDP in 2025, down from a previous audit-revealed 10%, which had led to a freeze on its $1.9 billion IMF program.
Ghana's President-elect John Dramani Mahama said he will not abandon the country's $3 billion rescue package with the International Monetary Fund, but wants to review the deal.
In Israel, inflation dipped to 3.4% in November but stayed above target, unlikely to prompt a rate cut from policymakers in the near future. The benchmark index .TA125 gained 0.5%.
Meanwhile, India's private sector output grew at the fastest rate in four months, according to preliminary flash PMI data, providing a positive close to 2024. The rupee INR= remained flat.
For TOP NEWS across emerging markets nTOPEMRG
For CENTRAL EUROPE market report, see CEE/
For TURKISH market report, see .IS
For RUSSIAN market report, see RU/RUB
For GRAPHIC on emerging market FX performance in 2024 http://tmsnrt.rs/2egbfVh
For GRAPHIC on MSCI emerging index performance in 2024 https://tmsnrt.rs/2OusNdX
Reporting by Pranav Kashyap in Bengaluru, editing by Ed Osmond
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