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EMERGING MARKETS-Trade tensions take toll on stocks and currencies, Turkish lira outperforms

Credit: REUTERS/MURAD SEZER

Continuing U.S.-China trade tensions dented emerging markets on Tuesday, while Turkey's lira outperformed other currencies after Turkish inflation fell by more than forecast.

By Agamoni Ghosh and Medha Singh

Sept 3 (Reuters) - Continuing U.S.-China trade tensions dented emerging markets on Tuesday, while Turkey's lira outperformed other currencies after Turkish inflation fell by more than forecast.

The trade dispute between Beijing and Washington, now in its second year, has roiled financial markets, disrupted global supply chains and raised fears of recession in major economies.

"Given that Beijing and Washington are struggling to agree on a date for a fresh round of talks, it suggests the trade war will continue, and we think it will actually escalate further over the coming weeks," Jason Tuvey, Senior EM Economist at Capital Economics, said.

MSCI's emerging market stocks index .MSCIEF fell 0.8% with technology stocks .MIEF0IT00PUS dropping 1%, weighed down by Asian heavyweights South Korea .KOSPI and Taiwan .TWII.

Stocks in mainland China .SSEC, .CSI300 however, closed higher helped by tech firms as investors cheered Beijing's push for tech independence amid the bruising trade war. .SS

Indian stocks .BSESN.NSEI lost more than 1% while the rupee INR= weakened nearly 0.5% as investors returned from a long weekend to react to data showing the country's weakest quarterly economic growth since 2013.

South African .JTOPI stocks shed 0.4%, while the rand ZAR= was little changed before second-quarter growth figures.

A Reuters poll of economists forecast second-quarter growth expansion at 2.4% compared to a 3.2% contraction in the first.

"A potential positive reaction may only be sustainable if the data surprises the market to the upside and/or in case of relief in the global trade tensions," said analysts from Credit Suisse in a note.

Africa's most industrialised economy is grappling with a vast build-up of public sector debt led by cash-strapped state power firm Eskom.

Most developing world currencies moved lower against the dollar as the possibility of a Britain leaving the European Union without a deal dented sterling FRX/.

But Turkey's lira TRY= rose 0.3% after data showed annual inflation fell by more than expected in August, likely paving the way for lower interest rates before year end. Turkish dollar-denominated sovereign debt also gained.

Investors will be closely watching developments in Argentina where momentary calm returned as the peso steadied on Monday as capital controls kicked in, but risks remained high as the country slips into a deepening financial crisis.

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 Agamoni Ghosh, Medha Singh in Bengaluru; Additional reporting by Ambar Warrick; Editing by Alexander Smith)

((Agamoni.Ghosh@thomsonreuters.com; +918067491716; Reuters Messaging: Agamoni.Ghosh.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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