* China’s factory deflation slows in July
* Escalating U.S.-China tensions weigh
* Turkish lira extends slide against dollar
* Russian rouble supported by rise in oil prices
By Shreyashi Sanyal
Aug 10 (Reuters) - Emerging market stocks and currencies traded in a tight range on Monday as worries remained about worsening Sino-U.S. ties, while signs of improvement in China’s industrial activity helped calm some nerves.
Following a strong start to the first week of August, emerging market stocks came under pressure on Friday after U.S. President Donald Trump signed orders banning WeChat and TikTok in 45 days’ time and announced sanctions on 11 Chinese and Hong Kong officials.
“Chinese authorities have not responded on how or whether they will retaliate, but we will probably get to know later this week when senior officials from both countries review the implementation of the Phase 1 trade deal,” said Hussein Sayed, chief market strategist at FXTM.
The MSCI’s index for developing world stocks struggled for direction, last down 0.1%, with declines mostly contained by data showing China’s factory deflation eased in July.
Trading volumes were light in Asia hours due to holidays in Japan and Singapore, while South African financial markets were also closed.
Most currency moves were subdued, with Turkey’s lira extending losses after touching new lows against the dollar last week as market participants awaited the central bank’s next move to stave off a crisis in the Middle East’s biggest economy.
Ratings agencies warned Turkey on Friday that it will likely have to hike interest rates sooner or later as it runs out of options to defend the lira.
Analysts at Commerzbank have warned that harsher capital controls can buy some more time to stabilise the currency but the underlying weakness arises out of an inconsistent monetary policy framework, featuring no inflation targeting.
The Turkish banking watchdog said it lowered the asset ratio which deposit banks were required to maintain to 95% from 100%, easing a requirement set in April to force private banks to lend more and buy more government debt.
Russia’s rouble found its footing in firmer oil prices after Saudi Arabian Aramco expressed optimism about Asian demand and an Iraqi pledge to deepen supply cuts.
Investors also watched out for Belarusian bonds as President Alexander Lukashenko won a landslide re-election victory, the central election commission said on Monday, after late night clashes between police and thousands of protesters who said the vote was rigged.
(Reporting by Shreyashi Sanyal in Bengaluru; Editing by Subhranshu Sahu)