LONDON, Nov 1 (Reuters) - Emerging stocks rose to a two-week high on Wednesday, fuelled by data showing that economic expansion was intact in many developing nations, although currencies fared more mixed against a tepid dollar ahead of a U.S. Federal Reserve meeting.
MSCI’s emerging market index gained for the fourth straight session, adding 0.8 percent, with stocks in Asia up 1 percent and world stocks rising to a record high.
Bourses were positive about reports that President Donald Trump was likely to pick Federal Reserve Governor Jerome Powell to succeed Janet Yellen at the helm of the central bank over a more hawkish John Taylor, pushing down yields on Treasury notes, while the dollar tread water.
The announcement - expected for Thursday - will follow a Fed meeting concluding later in the day which is widely expected to leave interest rates unchanged with a rate rise coming in December.
Fuelling further gains was economic data showing many emerging economies were still growing, albeit at a slower clip.
China’s Manufacturing Purchasing Manager’s Index (PMI) was unchanged at 51.0 in October - above the 50.0 mark that separates expansion from contraction - and in line with economists’ expectations.
Both Russian and Turkish manufacturing activity expanded in October, though at the slowest pace in four and eight months respectively. South Africa’s PMI showed the economy was still contracting, though at a slower pace thanks to an increase in new sales orders.
“The PMIs may have lost a bit of momentum but they are still in many cases solidly above 50 indicating that they are still in expansionary territory,” said Jakob Christensen, head of EM research at Danske Bank.
“The dollar momentum has lost a bit of strength so that is helping, and the expectation that it will be Powell who will follow Yellen as Fed governor is reassuring markets that there will be a gradual hiking pace,” he said, adding Treasury yields had stabilised in the wake of the last six weeks’ repricing.
Following stellar gains in most of October, the dollar took a breather over the past few session.
However, many emerging currencies still struggled.
Turkey’s lira weakened 0.8 percent in a second day of losses against the dollar as the central bank raised its year-end inflation forecast to 9.8 percent on Wednesday from 8.7 percent previously, and the bank’s governor said lira volatility and an oil price rise may push inflation higher in the short term. South Africa’s rand weakened 0.2 percent in its second day of losses.
Meanwhile, Russia’s rouble strengthened 0.3 percent helped by oil prices rising to their highest since mid-2015 as data showed OPEC has significantly improved compliance with its pledged supply cuts and Russia is also widely expected to keep to the deal.
Central and eastern European currencies broadly strengthened against the euro.
The Czech crown gained 0.2 percent after manufacturing business sentiment jumped to its highest level in more than six years in October thanks to expanding output and new orders.
The country’s central bank is expected to raise interest rates most likely by 25 basis points on Thursday though is seen holding off more tightening until early next year, analysts said in a Reuters poll.
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Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg
Morgan Stanley Emrg Mkt Indx 1129.33 +10.25 +0.92 +30.97
Czech Rep 1070.38 +4.77 +0.45 +16.14
Poland 2524.90 +7.87 +0.31 +29.62
Hungary 39611.64 -269.58 -0.68 +23.77
Romania 7852.68 +9.92 +0.13 +10.83
Greece 767.61 +8.31 +1.09 +19.26
Russia 1128.44 +15.03 +1.35 -2.07
South Africa 53271.75 +701.55 +1.33 +21.34
Turkey 12046.18 +1903.58 +1.73 +43.39
China 3396.07 +2.73 +0.08 +9.42
India 33600.27 +387.14 +1.17 +26.19
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 25.59 25.65 +0.24 +5.54
Poland 4.23 4.24 +0.14 +4.06
Hungary 311.25 311.23 -0.01 -0.78
Romania 4.60 4.60 +0.04 -1.40
Serbia 119.07 119.05 -0.02 +3.59
Russia 58.18 58.31 +0.24 +5.31
Kazakhstan 335.32 334.92 -0.12 -0.50
Ukraine 26.87 26.88 +0.04 +0.48
South Africa 14.14 14.12 -0.11 -2.89
Kenya 103.70 103.70 +0.00 -1.28
Israel 3.51 3.52 +0.13 +9.56
Turkey 3.82 3.79 -0.79 -7.71
China 6.61 6.63 +0.33 +5.02
India 64.58 64.74 +0.26 +5.22
Brazil 3.27 3.27 +0.05 -0.54
Mexico 19.17 19.15 -0.09 +8.09
Debt Index Strip Spd Chg %Rtn Index
Sov’gn Debt EMBIG 303 -2 .05 8 05.41 1
All data taken from Reuters at 10:18 GMT. Currency percent change calculated from the daily U.S.
close at 2130 GMT.
Reporting by Karin Strohecker, additional reporting and graphic by Claire Milhench Editing by Jeremy Gaunt.