EMERGING MARKETS – Stocks and currencies snap winning streak as US inflation nerves set in

By Susan Mathew

Nov 10 (Reuters) – Emerging market stocks and currencies broke a four-day winning streak on Thursday, with stocks retreating from one-month highs amid jitters ahead of U.S. inflation data that could influence the Federal Reserve’s policy tightening stance.

After gaining more than 4% in the past four sessions, the MSCI Emerging Markets Equity Index fell 1.4% with stocks broadly in the red.

Rising COVID-19 cases in China, particularly in the southern manufacturing hub of Guangzhou, hit Asian stocks as investors worried about curbs on economic activity in the world’s second-largest economy. .

Weakness in sentiment persisted during the European session, with stocks from Africa, Central Europe and the Middle East all falling.

All eyes were on US inflation data due at 13:30 GMT, which is expected to show headline inflation of 8% in October. The dollar was largely stable ahead of the data. The bets are nearly even between another 75 basis point hike or a smaller 50 basis point move from the Fed next month.

“For sure it’s caution before the CPI, but we also saw a slight rebound in October. Investors are getting a bit ahead of themselves. So that adds to the caution,” said said Per Hammarlund, chief emerging markets strategist. at SEB.

Aggressive tightening by major central banks this year has hampered risk sentiment as investors worry about the likelihood of a deep recession and it narrows interest rate differentials that make riskier currencies attractive .

On Thursday, most developing country currencies fell slightly.

Against a stable euro, the Polish zloty stabilized. It slid 0.7% on its worst day in a month on Wednesday when the central bank left the key rate unchanged at 6.75%, disappointing some who expected a hike. The bank warned that inflation would only return to a level at or near its target in 2025.

Citi strategists expect the interest rate to be suspended in the coming months and the first cut delayed until 2024.

“Given that inflation is unlikely to fall to acceptable levels in the coming quarters, such a strategy means that the zloty could underperform its regional peers in the coming months.”

The Czech koruna fell about 0.4% from nine-month highs reached earlier this week.

Data showed Czech consumer prices fell on a monthly basis for the first time since December 2020, falling 1.4% in October, while the year-on-year inflation rate fell to 15.1 %, much lower than expected.

It comes after the country’s central bank held rates steady for a third consecutive meeting last week. For 2022 Emerging Markets FX performance chart see http://tmsnrt.rs/2egbfVh For 2022 MSCI Emerging Market Index performance chart see https://tmsnrt.rs/2egbfVh

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For the RUSSIAN market report, see (Report by Susan Mathew in Bengaluru; edited by Uttaresh.V)