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China stocks gain on recovery signs
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On-target U.S. CPI boosts smaller rate hike bets
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Turkey’s home sales fall
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Poland, Czech inflation data on tap
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EM stocks rise 0.8%, FX flat against softer dollar
By Shubham Batra
March 15 (Reuters) – Emerging market stocks gained on Wednesday following a rally in U.S. shares after an on-target inflation print drove expectations of a smaller interest rate hike in March, while signs of an economic recovery in China improved sentiment.
MSCI’s emerging markets index rose 0.8% as U.S. Labor Department’s CPI report showed consumer prices cooled in February, largely in line with market expectations, with headline and core measures notching welcome annual declines.
But signs of economic softness juxtaposed with the regional banking scare have increased the odds that the U.S. central bank will implement a 25 basis-point hike to its key interest rate at the conclusion of its two-day policy meeting on March 22.
China stocks were steady as the world’s second-largest economy showed signs of a gradual recovery, with retail sales in the first two months jumping 3.5% year-on-year, reversing a 1.8% annual fall seen in December.
“We expect China’s growth momentum to improve further in coming months, driven mainly by the ongoing consumption recovery and still-accommodative macro policy,” said economists at Goldman Sachs in a note.
Some Asian currencies rose, leaving MSCI’s index of EM currencies up against a softer dollar.
The South African rand fell 0.4%, ahead of the release of retail sales figures later in the day, which will give an insight into consumer demand in Africa’s most industrialised economy. The figure is seen marking a significant fall in January compared to a year ago.
Turkish lira was flat at 18.9815 against the dollar. Turkey’s house sales fell 18% year-on-year in February, while it recorded a budget deficit of 170.56 billion lira ($8.99 billion) in February showing the impact of massive earthquakes last month.
The Russian rouble was 0.1% weaker against the dollar ahead of three government debt auctions on Wednesday, gaining support as oil prices pulled away from over three-month lows while investors await interest rate decision from the Bank of Russia this week.
In central and eastern Europe, the Hungarian forint fell 0.4% against the euro after its minister said inflation rate could drop to around 9% by the end of the year, potentially paving the way for interest rate cuts.
Polish zloty was flat against the euro ahead of the release of its consumer price inflation data for January and February and trade data for January. (Reporting by Shubham Batra in Bengaluru; editing by Uttaresh Venkateshwaran)
