January 18, 2019 / 10:10 AM / a year ago

EMERGING MARKETS-EM stocks jump on U.S.-China trade resolution hopes; FX subdued

Jan 18 (Reuters) - Emerging market stocks touched a fresh 1-1/2-month high on Friday as hopes of a resolution to the U.S-China trade dispute lifted investor sentiment, while developing currencies were subdued as the U.S. dollar clung onto recent gains.

The Wall Street Journal reported on Thursday that U.S. Treasury Secretary Steven Mnuchin discussed lifting some or all tariffs imposed on Chinese imports and suggested offering a tariff rollback at trade talks set for Jan. 30.

A U.S. Treasury spokesperson denied the report, while the WSJ article also stated that U.S. Trade Representative Robert Lighthizer had resisted Mnuchin’s idea.

“That’s what (the report) seems to have got the markets excited this morning, even though the treasuries seem to deny it,” said Koon Chow, EM macro and FX strategist, UBP.

“But that’s a very short-term impact...The macro environment still has its challenges, although the pessimism from December last year seems to be somewhat fading.”

MSCI’s index for emerging market stocks was on pace to record a fourth-straight week of gains: Asian stocks did most of the heavy lifting with mainland China and Hong Kong shares jumping over 1 percent.

Stocks in Moscow rose 0.6 percent, registering broad-based gains led by search engine giant Yandex N.V. , while Turkey’s BIST 100 index was on track to deliver its best weekly gain since July 2016.

Indian stock markets barely held on to gains, hampered by Sun Pharmaceutical Industries Ltd after reports of fresh allegations by a whistleblower on the drugmaker’s corporate governance.

Developing world currencies were subdued against a recovering dollar with Turkey’s lira and South Africa’s rand falling the most.

The rand extended losses from the previous session in the face of the central bank’s less hawkish tone and decision to leave interest rates unchanged on Thursday, saying it had noted an improved inflation outlook.

The SARB (South African Reserve Bank) has significantly lowered its inflation forecasts and its key rate outlook, mainly due to the significant decline in oil prices in the fourth quarter of 2018, Commerzbank analysts said in a note.

Russia’s rouble fell marginally, a day after the central bank data showed that its current account surplus for 2018 rose to $114.9 billion, with private sector outflows accounting for $67.5 billion of that.

In Eastern Europe, the Polish zloty fell 0.2 percent against the euro after a batch of economic data proved to be below analysts’ expectations for December.

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see (Reporting by Agamoni Ghosh in Bengaluru Editing by Mark Heinrich)

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