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China, Hong Kong stocks slip on U.S.-Sino tensions
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Turkey c.bank monetary policy minutes at 1100 GMT
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Hungary's Q4 GDP growth 0.4% y/y, same as first reading
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Stocks down 0.3%, FX flat against a stronger dollar
By Shubham Batra and Amruta Khandekar March 2 (Reuters) - Emerging market stocks edged lower on Thursday, after a sharp rally in the previous session, as U.S.-Sino tensions weighed on sentiment, while hawkish comments from Federal Reserve officials drove up bond yields to multi-year highs.
The MSCI EM equities index slipped 0.3%, after clocking its biggest single-day percentage gain in over seven weeks on Wednesday on upbeat China manufacturing data. However, dealing a fresh blow to risk appetite, U.S. two-year Treasury yields touched an over 15-year high in the previous session after a survey pointed to higher prices for raw materials, with Fed officials divided over the need for even more restrictive interest rates. "Rising U.S. Treasury yields are a source of selling pressure on emerging currencies as the dollar is getting broadly stronger," said Piotr Matys, senior FX analyst at In Touch Capital Markets. "Market participants started repricing the terminal rate following the latest set of U.S. data, which indicated that inflationary pressure may prevail for longer." China stocks closed down 0.2% on Thursday, while Hong Kong's Hang Seng index closed 0.9% lower amid heightened U.S-Sino tensions. The U.S. is seeking out allies about the possibility of imposing new sanctions on China if Beijing provides military support to Russia, according to four U.S. officials and other sources. Starting the year with a rally, EM assets came under pressure in February on worries that the U.S. central bank would keep raising interest rates for longer given economic strength.
Currencies in the region were flat against a
stronger dollar.
South Africa's rand weakened 0.2% in early trade on
Thursday, as the dollar steadied.
Turkish lira hovered around its record lows hit
earlier this year at 18.8905, ahead of the country's central
bank releasing minutes of its latest monetary policy meeting.
Goldman Sachs has warned of the potential for foreign
exchange market instability in the run up to Turkey's elections
following years of currency reserve depletion and other costly
measures.
In central and eastern Europe, Hungarian forint fell 0.3% against the euro as Hungary's economy grew by an
annual 0.4% in the fourth quarter, according to final unadjusted
data, unchanged from a preliminary figure.
Elsewhere in emerging markets, Indian Prime Minister
Narendra Modi called on world leaders to find common ground on
divisive issues on Thursday as he inaugurated a ministerial
meeting of the Group of 20 bloc where Russia's year-long war in
Ukraine is taking centre-stage.
(Reporting by Shubham Batra and Amruta Khandekar in Bengaluru)
