Economic news

EM-Stocks Set for Best Quarter in Nearly 11 Years

* Russia’s rouble falls in tandem with oil prices

* MSCI EM stocks up 17.7% for Q2

* EMEA stocks a mixed bag; South Africa leads gains

By Ambar Warrick

June 30 (Reuters) - Developing world stocks edged higher on Tuesday and were set for their best quarter since 2009, as improving economic readings raised hopes of a quicker global economic recovery from the coronavirus crisis.

The MSCI’s index of emerging market equities rose about 0.5% after a four-session losing streak, and was set to end the quarter about 17.7% higher, its best performance since September 2009.

The gains come after a nearly 24% drop in the first quarter of 2020. While some improving economic readings from the United States and China had helped risk appetite, a recent spike in new infections brought about fresh caution.

“On one hand, further loosening of lockdown measures around most of the world may allow economies to continue their road to recovery,” Charalambos Pissouros, senior market analyst at JFD Group, wrote in a note.

“But on the other hand, the re-introduction of restrictions may result in a second hit to the global economy, and thereby bring equity indexes and risk-linked assets back under renewed selling pressure.”

Equity markets in Europe, Middle East and Africa (EMEA) showed a mixed trend, with Turkish and South African bourses trading in the black, while those in Hungary and Poland moved lower.

Strong industrial data from China helped Asian bourses earlier in the day, with Chinese stocks closing around 1% higher.

Continued weakness in oil prices saw Russia’s rouble underperform its peers with a near 0.6% drop. The currency was also under pressure ahead of a government bond auction, which will test investor sentiment as a vote on changes to the country’s constitution draws to close.

Poland’s zloty fell to the euro after flash data showed that the country’s June inflation was above expectations.

Developing world currencies have largely missed out on the recovery witnessed by equities, given that several fiscal and monetary measures employed to combat the virus impact, including interest rate cuts and budget-stressing spending packages, pressured the foreign exchange space.

Safe-haven flows to the dollar also pulled a bulk of capital from emerging market currencies. For instance, the MSCI’s index of developing world currencies is set to add only about 1.8% for the quarter, compared with a 6% loss in the first quarter.

Reporting by Ambar Warrick in Bengaluru; Editing by RashmiAich

Source: Reuters


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