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EMERGING MARKETS-Slip in emerging equities, China data play on investors' minds

Credit: REUTERS/Aly Song

Emerging market stocks fell on Friday, with risk sentiment kept in check by weak Chinese industrial output data, which investors scanned for clues on the toll exacted by the country's bruising trade war with the United States.

By Aaron Saldanha

June 14 (Reuters) - Emerging market stocks fell on Friday, with risk sentiment kept in check by weak Chinese industrial output data, which investors scanned for clues on the toll exacted by the country's bruising trade war with the United States.

China's industrial output growth slowed to a more than 17-year low of 5% in May, well below expectations, in the latest sign of weakening demand in the economy.

"There's always an immediate impact of whether the Chinese data is going to surprise to the downside or the upside, at the moment we're seeing data tainted by trade wars," said Monex Europe FX Analyst Simon Harvey, adding authorities have been willing to provide stimulus in the event of a growth slowdown.

MSCI's developing world stocks index .MSCIEF dropped 0.4%, hurt by stocks in China .SSEC falling 1%, while Chinese blue-chips .CSI300 declined 0.8%. .SS

MSCI's emerging market currencies index .MIEM00000CUS dipped. China's onshore spot yuan CNY=CFXS eased and remained on course to post a sixth weekly loss in seven weeks. CNY/

Monex Europe's Harvey said he believed the weakened yuan could aid a pick up in growth over the "next couple of months", against the backdrop of an easing in financial conditions he expects to see in the world's second largest economy.

Hong Kong's dollar HKD= firmed marginally while stocks .HSI slipped 0.7%. The week has seen equities swept up by uncertainty as residents protested against an extradition bill.

Russia's rouble RUB= firmed 0.2%, ahead of a central bank rate decision. The bank is expected to cut borrowing costs, opening the door for a further easing cycle later this year amid slowing economic growth and inflation.

A vast majority of analysts and economists polled by Reuters predict the central bank will cut the key rate to 7.50% later in the day.

"Today's policy announcement is pretty much priced in," given governor Elvira Nabiullina's comments last week, said Monex Europe's Harvey.

"People are looking at when the next rate cut's going to be, there's a debate at the moment whether it's going to be 50 basis points or 75 basis points over the course of 2019, it's not about the rate cut itself, it's about the forward guidance."

Moscow-traded stocks .IMOEX rose 0.5%, set for a record closing high.

Turkey's lira TRY= was 0.8% softer, while stocks .XU100 fell 0.4%. Prices of the country's dollar-denominated bonds broadly dropped on growing tensions with the United States.

Turkey's foreign minister said it will "take reciprocal steps" if the United States imposes sanctions over its purchase of Russian S-400 defences.

South Africa's rand ZAR= strengthened 0.2% while equities .JTOPI rose 0.1%.

In emerging Europe, yields on Polish 10-year local bonds PL10YT=RR hit their lowest levels in more than four years at about 2.39%.

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

Russian yield curve in June 2019https://tmsnrt.rs/2XMHpdt

(Reporting by Aaron Saldanha in Bengaluru; Editing by Kirsten Donovan)

((Aaron.Saldanha@thomsonreuters.com; +91 80 6749 1130; Reuters Messaging: Aaron.Saldanha@thomsonreuters.com@reuters.net))

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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