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China Jan-Feb exports, imports slump again
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Fed's Powell testimony before Congress to start at 1500
GMT
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South Africa's Q4 GDP growth seen moderating
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EM stocks down 0.2%, FX flat against softer dollar
By Shubham Batra and Amruta Khandekar March 7 (Reuters) - Emerging market stocks edged lower on Tuesday as weak trade data from China hurt sentiment, while investors awaited Federal Reserve Chair Jerome Powell's testimony before Congress for the outlook on U.S. interest rates. The MSCI EM equities index was down 0.2% as a fall in China's exports for the January-February period pointed to continued weakness in demand, dragging China stocks down 1.5%. China's reopening had boosted hopes that certain parts of emerging markets could benefit from recovery in demand from the world's second-largest economy, but its modest growth target for 2023 and weak trade data has disappointed investors. The main focus for the day, however, is on Powell's semiannual monetary policy testimony due at 10 a.m. EST (1500 GMT) for insights as to how aggressive the Fed will be in raising interest rates.
It will be followed by a slew of data later in the week which will offer clues on the strength of the U.S. economy. "Powell's testimony, February non-farm payrolls and CPI prints will be key events to monitor in the coming days to gauge the pace at the next meeting. Our base case is still three more 25 basis point hikes," Barclays strategists said in a note.
"EM currencies should trade well in this environment. Meanwhile, a move to 50 basis points would likely be more destabilizing."
Regional currencies were flat against a softer dollar. The Turkish lira was flat against the greenback as Turkish opposition leader Kemal Kilicdaroglu emerged as the main challenger to President Tayyip Erdogan in landmark elections expected on May 14. South African rand weakened 0.1% against the dollar after President Cyril Ramaphosa appointed a new electricity minister to try to solve the country's worst power cuts and added other allies to the cabinet ahead of elections next year. Later in the day, South Africa will report its GDP growth, which is expected to moderate in the fourth quarter from a year ago. The Russian rouble was flat against the dollar amid low local market activity before a holiday. In central and eastern Europe, Hungarian forint was flat against the euro, with data showing the country's industrial output declined by an annual 0.2% in January, below forecasts.
Sri Lanka dollar bonds soared and the rupee jumped on Tuesday after President Ranil Wickremesinghe said government has received new financing assurances from China, paving the way for an International Monetary Board programme approval. (Reporting by Shubham Batra and Amruta Khandekar in Bengaluru, Editing by Angus MacSwan)
