September 12, 2018 / 9:13 AM / 13 days ago

EMERGING MARKETS-Emerging stocks hit lowest since May 2017, lira firms

LONDON, Sept 12 (Reuters) - MSCI’s benchmark emerging equities index extended losses on Wednesday, hitting its lowest since May 2017 as trade tensions troubled Asian bourses, while Turkey’s lira firmed ahead of an expected rate rise on Thursday.

China has told the World Trade Organization (WTO) that it wants to impose $7 billion a year in sanctions on the United States in retaliation for Washington’s non-compliance with a ruling in a dispute over U.S. dumping duties.

Separately, U.S. President Donald Trump said that the United States was taking a tough stance with China.

“There are many external factors which weigh negatively on the psychology of investors - trade wars for example, which is not just pitching one country versus another, but conflicts are now widespread, with many countries involved and affected,” said Cristian Maggio, head of emerging markets strategy at TD Securities.

Bank of England Governor Mark Carney also warned that China’s financial system posed one of the bigger risks to global financial stability.

Asian bourses took the brunt of the selling, with the Asia ex-Japan index having fallen for 10 straight sessions, its longest losing streak since September 2000.

Chinese mainland shares closed at their lowest level since January 2016, down 0.3 percent, with the blue-chip index down 0.7 percent, its weakest close since August 2016.

China’s yuan hit its lowest level against the dollar in 2-1/2 weeks after an official guidance rate was fixed at its weakest since Aug. 24.

India’s rupee plumbed another record low before firming 0.4 percent, with inflation seen slipping below the central bank’s medium-term target in August.

South Korea’s won also slipped 0.4 percent as unemployment hit an eight-year high in August.

But the Turkish lira firmed 0.4 percent ahead of Thursday’s central bank meeting. The bank signalled it would take action after inflation surged to 17.9 percent in August, its highest in nearly a decade and a half.

“The central bank can’t afford not to hike as this would trigger another steep sell off in the currency,” Maggio said, adding that over the longer term, the risk was the bank would continue to fall behind the curve.

Turkish stocks rose 0.9 percent, with the banking sector up 0.4 percent.

Elsewhere in emerging Europe, Russia’s rouble fell 0.2 percent to around 69.5 per dollar, while Moscow shares gained 0.4 percent.

Earlier this week the rouble touched 70.60 per dollar, its weakest since mid-March 2016, on the threat of more U.S. sanctions against Moscow.

Trump could sign an executive order as soon as Wednesday slapping sanctions on any foreign companies or people who interfere in U.S. elections.

The Czech crown firmed 0.35 percent against the euro to its strongest since mid-May after the central bank governor signalled the bank could increase interest rates as soon as this month.

Overnight, Argentina kept its interest rate at 60 percent as expected, with the peso taking another hit, slipping 1.5 percent.

For GRAPHIC on emerging market FX performance 2018, see tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2018, see tmsnrt.rs/2dZbdP5

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg

on year

Morgan Stanley Emrg Mkt Indx 1002.58 -0.75 -0.07 -13.46

Czech Rep 1090.23 +8.79 +0.81 +1.12

Poland 2255.82 +7.47 +0.33 -8.35

Hungary 36450.78 +78.84 +0.22 -7.43

Romania 8270.44 -11.67 -0.14 +6.66

Greece 699.87 +7.83 +1.13 -12.77

Russia 1063.59 +7.69 +0.73 -7.87

South Africa 50091.36 +49.27 +0.10 -4.65

Turkey 93256.68 +867.57 +0.94 -19.14

China 2656.11 -8.69 -0.33 -19.69

India 37625.61 +212.48 +0.57 +10.48

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2018

Czech Rep 25.55 25.64 +0.35 -0.09

Poland 4.31 4.30 -0.13 -3.07

Hungary 324.69 324.44 -0.08 -4.36

Romania 4.63 4.63 -0.11 +0.93

Serbia 118.34 118.32 -0.02 +0.05

Russia 69.47 69.38 -0.13 -17.00

Kazakhstan 377.67 380.57 +0.77 -11.88

Ukraine 28.01 28.08 +0.25 +0.48

South Africa 15.03 15.05 +0.13 -17.76

Kenya 100.70 100.65 -0.05 +2.38

Israel 3.59 3.58 -0.25 -3.05

Turkey 6.39 6.42 +0.41 -40.73

China 6.87 6.87 +0.05 -5.25

India 72.35 72.63 +0.39 -11.78

Brazil 4.15 4.15 +0.01 -20.23

Mexico 19.13 19.18 +0.28 +2.71

Debt Index Strip Spd Chg %Rtn Index

Sov’gn Debt EMBIG 403 2 .00 7 60.53 1

Reporting by Claire Milhench; additional reporting by Karin Strohecker; editing by Alexander Smith

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