Risk-off mood hits EM assets ahead of U.S. payrolls data
Updated at 0855 GMT
Tech leads stocks lower
EM bond funds see outflows over past week: BofA
Turkish lira, Indian rupee hit record low vs USD
Ethiopia's PM defends currency float
By Lisa Pauline Mattackal
Aug 2 (Reuters) -Emerging markets stocks slumped on Friday, tracking broader global risk-off sentiment as investors rushed for safe-haven assets amid worries about a U.S. economic slowdown.
MSCI's index of emerging market stocks .MSCIEF slumped 2.2%, set to clock its worst day in one year if losses hold, while an index of EM currencies .MIEM00000CUS was flat.
An initial boost to risk assets following the Federal Reserve's meeting on Wednesday quickly gave way to concerns over global growth, after a weak U.S. ISM manufacturing report that followed further signs of economic slowdown in China.
"When China coughs, the world can catch a cold ... emerging markets would be exposed here if risk sentiment were to sour further," said Harry Mills, director at Oku Markets.
Some currencies in emerging Europe fared slightly better against a weaker dollar =USD as investors turned to the safe haven Japanese yen JPY= and Swiss franc CHF=. FRX/
The Czech crown EURCZK=, CZK= and Hungarian forint HUF= were up about 0.1% against the dollar, while the Polish zloty PLN= jumped 0.4% after falling in the previous session. The zloty EURPLN= gained 0.3% against the euro EUR=.
Both the Turkish lira TRYTOM=D3 and Indian rupee INR=IN touched record lows against the greenback, while the Russian rouble RUB= slipped about 0.4%.
Focus now shifts to U.S. nonfarm payrolls data for July later in the day, where forecasts are for employment in the world's largest economy to increase by 175,000.
"Investor confidence in the growth outlook may breathe a sigh of relief today should the payrolls number surprise to the upside, though, it's a fight between investor sentiment and safety versus bets on Fed rate cuts," Mills said.
Investors also grappled with rising geopolitical tensions, after the Israeli military said on Thursday that the head of Hamas' military wing, Mohammed Deif, was killed, a day after group leader Ismail Haniyeh was killed in Tehran.
Bourses in Turkey .XU100, Prague .PX and Warsaw .WIG20 slumped between 0.7% and 1.7%, following emerging Asian equities that were also broadly lower.
Indexes in Taipei .TWII and Seoul .KS11 led declines as a selloff in U.S. tech stocks and disappointing results from Intel INTC.O weighed on the tech sector.
MSCI's EM stock index was on track to fall for a third straight week, however, the currency index was set to rise about 0.3% in its best week since mid-May.
EM debt-focused funds saw outflows of $0.2 billion over the past week, according to data from Bank of America Global Research, though EM equity funds have seen about $4.5 billion in inflows over the past nine weeks.
Elsewhere, Ethiopia's Prime Minister Abiy Ahmed defended the country's decision to float its birr ETB= currency this week, a move which helped the country secure financing from both the International Monetary Fund and the World Bank.
However, the birr has slumped nearly 40% against the dollar since then.
HIGHLIGHTS:
** Investors scramble to get out of the way of the rising yen
** Brazil, Mexico and Colombia call for Venezuela to release full vote tallies
** Ukraine paid $200 mln to holders of GDP warrants, ministry says
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 Lisa Mattackal in Bengaluru; Editing by Conor Humphries
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