EMERGING MARKETS-EM stocks edge higher; lira weakens ahead of c.bank decision

Credit: REUTERS/Murad Sezer

By Susan Mathew

Oct 24 (Reuters) - Emerging-market shares rose on Thursday as tensions related to the U.S.-China trade spat and Brexit eased, while the Turkish lira retreated from previous session's rally as investors kept a cautious stance ahead of the central bank rate decision.

MSCI's index of emerging market currencies .MIEM00000CUS traded marginally higher against a steady dollar with firm currencies in Russia RUB= and South Africa ZAR=, while those in Asia largely weakened.

The Emerging Markets stocks index .MSCIEF rose 0.3%, on course to log its ninth session of gains in 11. Mainland China stocks ended flat, while those in Hong Kong .HIS, Taiwan .TWII, Russia .IMOEX, Turkey .XU100 and South Africa .JTOPI rallied between 0.4% and 1.1%.

On the trade front, Washington and Beijing are back to discussions over prospects of some wider agreement next month, while another likely Brexit extension takes "no deal" fears off the table for now.

"The troubling part now is the waiting gaming process to gauge if the Global PMI's turn and consumer confidence bounces," said Stephen Innes, Asia Pacific market strategist at AxiTrader.

With no new headlines from either front, markets now look to a batch of major central bank meetings and PMI's. Japanese PMI came in weak, while French business activity was firmer than expected, with all eyes now on U.S. key data. MKTS/GLOB

The European Central Bank monetary policy decision is due later in the day, followed by the U.S. Federal Reserve and Bank of Japan next week. Within the EM space, interest rate decisions from Russia, Turkey and Brazil will be watched for.

The Turkish central bank is expected to deliver a 100 point rate cut at its meeting on Thursday to take the benchmark rate to 15.5%, a Reuters poll showed.

The lira TRY= dipped 0.2%, but hovered near two-week high hit on Wednesday after U.S. President Trump lifted sanctions on Turkey as he claimed that a U.S.-brokered ceasefire between Turkish and Kurdish forces in Northern Syria was holding.

Analysts expect the Turkish central bank to cut rates at this meeting, but they differ on the need and magnitude. While Credit Suisse says the pricing in the cross-currency rates market allows a larger cut, Rabobank strategists consider it a prudent move if the central bank stands pat until the dust over the Syria crisis settles.

"Over the past few months the (central bank) slashed rates by a total of 750bp ... easing the burden on the economy. Why take the risk of cutting rates further and making the lira less attractive for carry trade players?," Rabobank's EM strategist Piotr Matys says.

For GRAPHIC on emerging market FX performance 2019, see http://tmsnrt.rs/2egbfVh

For GRAPHIC on MSCI emerging index performance 2019, see https://tmsnrt.rs/2OusNdX

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see CEE/

For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB

(Reporting by Susan Mathew in Bengaluru; Editing by Sherry Jacob-Phillips)

((susan.mathew@thomsonreuters.com; +91-80-6749-1130))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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