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Emerging market (EM) stocks extended declines on Friday and were set to log their worst week since mid-July, while currencies fell to two-year lows as worries about China’s COVID-19 and U.S. jobs data due later in the day kept investors cautious.
Chinese blue-chips and Hong Kong stocks slid as some districts of the southern tech hub of Shenzhen extended COVID curbs, stopping short of a full lockdown as they try to rein in rising COVID cases.
China’s zero-COVID policy has intensified economic challenges, with impacts felt across the globe.
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Major central banks adopting aggressive monetary policy tightening have also increased recession fears, with the U.S. Federal Reserve and the European Central Bank both seen hiking by 75 basis points this month.
Investors now look to U.S. non-farm payrolls and unemployment data due at 1230 GMT as the Fed tries to cool the labor market in its battle against surging inflation.
“Even if non-farm payrolls are solid, it would not really add much pressure for the Fed to tighten even further because the market has already arrived at the relatively solid pricing of the next moves for the Fed and the ECB,” said Marek Drimal, lead CEEMEA strategist at Societe Generale.
“So the pain for now has been delivered.”
China remains a worry as the curbs can impact global trade and supply chains, which could further boost supply-side inflationary pressures, he said.
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Emerging market fund Ashmore on Friday reported a 58% drop in full-year pretax profits and double-digit declines in net revenue, citing widespread risk aversion due to the Ukraine war as well as inflation and higher rates globally.
Ashmore shares are down 30% this year, and earlier hit 13-year lows as investors pull out of risky emerging market assets.
CENTRAL AND EASTERN EUROPE OUTPERFORM
Gains in some bourses in Asia and elsewhere limited declines for the broader EM stocks index, which was down 0.5% on Friday, and 3.5% on the week. Main indexes in Turkey , South Africa, Hungary and Poland gained between 0.8% and 1.5%.
The EM currencies index looked to log its third straight week lower. The index was down 0.2% ahead of the U.S. data, with the dollar staying close to two-decade highs.
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While most currencies were down against the greenback, central and eastern European currencies firmed against a stronger euro.
Hungary’s forint jumped 0.5%, and was on course to end the week up almost 3%, in what could be its biggest weekly gains in more than two years.
The Czech crown extended gains, up for a sixth session in seven, while the Romanian leu was not far from two-year highs. For GRAPHIC on emerging market FX performance in 2022, see https://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2022, see https://tmsnrt.rs/2OusNdX
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For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see (Reporting by Susan Mathew in Bengaluru; Editing by Robert Birsel)
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