Emerging stocks retreated on Friday and were set to end the week down almost 2 percent, whilst the yuan faced its fifth straight week of decline against the dollar, its longest losing streak in seven months.
The benchmark emerging equity index was down 0.3 percent after weak performance in Asia set the tone for European trading.
Among the biggest fallers in Asia were Chinese mainland stocks, which lost 0.9 percent, and Hong Kong, down 0.7 percent, whilst in Europe, Russian dollar-denominated shares lost 0.7 percent and Turkish stocks slipped 0.8 percent.
Investors have stepped back before Friday’s U.S. non-farm payrolls data. The consensus is for a gain of 175,000 jobs in June according to a Reuters poll, but the previous month’s negative surprise has made markets wary.
“If we see another weak print, especially an even bigger downside surprise than the miserable 38,000 recorded last month, then the risk-off mood that prevailed at the start of the week is likely to return with a vengeance,” Rabobank analysts said.
On the flip side, a strong number could renew speculation about a U.S. rate increase this year, triggering dollar strength and punishing emerging assets.
The yuan is already under pressure, with bets against the Chinese currency hitting a five-month high in the last two weeks on expectations it will be allowed to weaken further to support the world’s second-largest economy.
“They will continue to devalue, everyone is in the same game, the race to the bottom,” said Mahesh Bhimalingam, global head of emerging markets credit strategy at BNP Paribas.
The yuan has declined almost 0.5 percent over the past week, and is set for its fifth straight weekly loss, its longest losing streak since mid-December.
Other currencies such as the South African rand, Turkish lira and Russian rouble benefited from a weaker dollar, gaining 0.2-0.4 percent .
The Hungarian forint firmed a touch against the euro , trading at its strongest level in two weeks on hopes the sovereign credit rating could be raised to investment grade by Moody’s after close of business on Friday.
Better-than-expected foreign trade surplus numbers for May added to the upbeat mood.
However, some analysts struck a note of caution, given Britain’s vote to exit the European Union has added to uncertainties about growth in central and eastern Europe.
“There had been a high likelihood of Moody’s following Fitch and upgrading Hungary to investment grade at today’s review; but this appears unlikely in view of Brexit uncertainties, which is making policymakers revise forecasts lower,” Commerzbank analysts said in a note.
The Polish zloty has weakened around 0.5 percent against the euro this week, and was flat on the day.
But Brexit has driven developed market yields even lower, spurring inflows to higher-yielding alternatives. Emerging bond funds enjoyed their biggest weekly inflows on record over the past week, attracting $3.3 billion, JPMorgan said.
Local currency emerging debt yields have fallen around 20 basis points on JPMorgan’s GBI-EM index since the June 23 referendum.
The yield premium paid by Iraq sovereign bonds over U.S. Treasuries on the JPMorgan EMBI Global index has fallen by 18 basis points since July 6 to 892 basis points after the International Monetary Fund approved a new three-year $5.34 billion standby arrangement.
The spreads tightened 24 bps on Thursday.
For GRAPHIC on emerging market FX performance 2016, see link.reuters.com/jus35t
For GRAPHIC on MSCI emerging index performance 2016, see link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2016, see link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2016, see link.reuters.com/zyh97s
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 824.10 -2.89 -0.35 +3.77
Czech Rep 811.35 -3.23 -0.40 -15.16
Poland 1711.48 -2.03 -0.12 -7.94
Hungary 26857.75 -112.70 -0.42 +12.28
Romania 6476.04 -0.54 -0.01 -7.54
Greece 527.03 -4.61 -0.87 -16.52
Russia 916.90 -6.95 -0.75 +21.12
South Africa 44783.97 -18.56 -0.04 -2.21
Turkey 77709.33 -678.37 -0.87 +8.34
China 2989.25 -27.60 -0.91 -15.54
India 27126.39 -75.10 -0.28 +3.86
Currencies Latest Prev Local Local
close currency currency
% change % change
in 2016
Czech Rep 27.03 27.02 -0.04 -0.13
Poland 4.43 4.43 -0.04 -3.93
Hungary 315.15 315.00 -0.05 -0.16
Romania 4.51 4.51 +0.00 +0.11
Serbia 123.25 123.37 +0.10 -1.44
Russia 64.17 64.43 +0.40 +13.68
Kazakhstan 337.92 337.74 -0.05 +0.76
Ukraine 24.83 24.80 -0.12 -3.54
South Africa 14.72 14.74 +0.11 +5.02
Kenya 101.10 101.10 -0.00 +1.09
Israel 3.88 3.88 +0.06 +0.24
Turkey 2.93 2.94 +0.36 -0.29
China 6.69 6.68 -0.14 -2.94
India 67.38 67.49 +0.16 -1.75
Brazil 3.36 3.37 +0.08 +17.70
Mexico 18.81 18.83 +0.10 -8.72
Debt Index Strip Spd Chg %Rtn Index
Sov’gn Debt EMBIG 401 0 .02 7 51.82 1
All data taken from Reuters at #N/A The record could not be found GMT. Currency percent change calculated from the daily U.S.
close at 2130 GMT.
Source: Reuters