Dovish Fed lifts stocks while FX slips; Czech rate decision eyed
Updated at 0850 GMT
Czech rate decision due at 1230 GMT
Ukraine suspends debt payments
China PMI shows weakening factory activity
Czech, Turkish manufacturing activity slows
Turkey stocks jump
By Lisa Pauline Mattackal
Aug 1 (Reuters) -Emerging market stocks rose on Thursday after the Federal Reserve signalled it could start easing policy in September, while currencies across emerging Europe slipped amid weak manufacturing data for several economies.
In focus, the Czech crown EURCZK= lost 0.3% against the euro EUR= ahead of an expected 25 basis point (bps) rate reduction from the country's central bank, slowing the pace of easing after four 50 bps cuts.
"We expect a hawkish outcome from today's meeting ... CZK has moved back above 25.400 EUR/CZK under the pressure of aggressive dovish pricing in recent days," said Frantisek Taborsky, EMEA forex and fixed income strategist at ING.
"In our view, the CZK has decent potential to rally from these levels."
MSCI's index of emerging market stocks rose 0.4%, tracking gains in global equities after Wednesday's signal from Fed Chairman Jerome Powell that the central bank could start easing rates in September if U.S. economic data continues on its current trajectory.
Lower borrowing costs in the U.S. typically weaken the dollar and lift the appeal of emerging market assets.
However, the dollar =USD regained some ground after slipping for two straight sessions, with most currencies in emerging European economies weakening against the greenback.
Weaker manufacturing data also weighed, with the Hungarian forint EURHUF= losing 0.6% versus the euro, after manufacturing activity remained in contraction territory.
The Polish zloty EURPLN= dipped 0.2% against the euro, after S&P Global's Purchasing Managers' Index showed its manufacturing sector slowed its decline in July, but was still in contraction.
Ukraine was also in focus after it temporarily suspended international debt payments as it finalises a restructuring plan to slash $20 billion of international debt. However, the move is unlikely to trigger much concern in debt markets.
A bond maturing in 2026 US903724AR33=TE rose about 1.5 cents on the dollar, while a bond that provides additional payments when the country's economy grows XS1303929894=TE was little changed.
MSCI's International Emerging Markets Currency Index .MIEM00000CUS edged 0.1% higher after briefly touching its highest since mid-July.
Russia's rouble RUB= strengthened 0.5% against the dollar, as worries about rising conflict in the Middle East lifted the price of oil, one of its main exports. O/R
In equities, Turkish stocks .XU100 jumped 1.7%, led by a 3.6% rise in its bank index .XBANK.
Manufacturing in Turkey contracting for a fourth straight month, data showed.
Meanwhile, Nigerian security forces were deployed in major cities, while the government said it was open to dialogue ahead of planned protests against a cost of living crisis.
Weaker PMI data also weighed on Chinese shares .SSEC, with a slump in its manufacturing activity leading generally weak readings across Asia's factories in June.
HIGHLIGHTS:
** Hedge fund allocations to China hit five-year low
** GRAPHIC - Election jolts course through markets as risk returns
** Tensions high in Venezuela after contested election, with more arrests feared
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 Giles Elgood
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
