BENGALURU (July 14): Emerging markets stocks fell today after Covid-19 cases continued to rise globally and economic growth forecasts were cut further, with currencies taking a hit from a firmer dollar as US-China tensions flared.
Global coronavirus cases topped 13 million yesterday, while a return to curbs for the US state of California revived worries over whether the virus can cause more economic damage.
"The prospect of the country (US) reversing back to partial lockdown could continue to spook the market," said Saktiandi Supaat, the head of foreign exchange research at Maybank.
MSCI's index for emerging market equities fell 1.2%, with stocks in Asia leading declines, while its currencies counterpart slipped 0.4% against the US dollar .
Demand for the US dollar, widely viewed as a safe-haven currency, firmed on heightened geopolitical tensions after the US yesterday rejected China's disputed claims to offshore resources in most of the South China Sea, a move met with criticism from Beijing.
"US-China tensions have broadened from trade to technology to sanctions and now to territorial disputes," Maybank's Supaat said.
Developing world markets have risen sharply from a steep downturn in March on the back of global stimulus, but moves in recent weeks have been subdued as the focus turns towards earnings forecasts.
More negative forecasts poured in as rating agency S&P Global cut its emerging market growth expectations yesterday, predicting a 4.7% slump on average this year, while warning that all countries would be left with permanent scars.
S&P said that South Africa's economy will contract by more than initially projected, projecting a 6.9% decline for 2020, compared with a previous forecast of a 4.5% contraction. The South African rand gained slightly in early trading.
Poland's central bank was expected to release its interest rate decision today. It was also expected to release its current account balance for May, estimated at €701 million (US$794.4 million or RM3.4 billion).
The Polish zloty was range-bound after the re-election of President Andrzej Duda yesterday, sparking concern over the potential for renewed confrontation with the European Union (EU).
Russian stocks fell 1.8% as gas producer Gazprom declined after reporting a first-quarter net loss of 116 billion roubles (US$1.64 billion or RM7 billion).
The Russian rouble was flat.