EMERGING MARKETS-Recession worries rattle emerging stocks, firm dollar dents FX

Sruthi Shankar
·2 min read

* Dollar firm on safe haven demand

* Indian rupee hits new low

* Rouble nears 50 per dollar

By Sruthi Shankar

June 29 (Reuters) - An index of emerging market stocks was on course to snap a four-day winning run on Wednesday amid fears of a global recession, while a firm dollar dented most other currencies as investors sought safe-haven assets.

The MSCI's emerging market equities index tumbled 1.6%, falling off a two-week high it hit earlier this week as Wall Street indexes sold off sharply on Tuesday after consumer sentiment data raised concerns of a recession.

Stock markets in Hong Kong, Shanghai, Johannesburg and Istanbul shed between 0.8% and 1.9%, with data from Turkey and South Africa also pointing to weakening sentiment among consumers.

"Our position is that bear market is not over with if you are talking about the broad risk sentiment," said John Hardy, head of FX strategy at Saxo Bank.

"One of the sparks for yesterday's selloff was very bad confidence data out of the United States. When we are getting gathering signs of a recession, market stops repricing based on rises in yields and more on concerns about a recession."

The safe-haven dollar firmed, putting pressure on emerging market currencies. The MSCI's index of EM currencies dropped 0.4%.

Soaring inflation, a potential global recession and the Ukraine conflict have put the EM equities and FX indexes on pace for their worst quarterly performances since March 2020 when the coronavirus pandemic wreaked havoc on global financial markets.

The Indian rupee touched a new record low at 78.97 per dollar, with traders saying the currency could weaken towards 79 during the session, but the central bank is expected to intervene to slow the slide.

The Korean won slid half a percent, while the Philippine peso shed 0.3%.

"If we are going into recession, it is negative for Asian economies unless China is about to do big stimulus," added Hardy. "I would especially be watching the exporters."

A standout gainer was the Russian rouble, which neared 50 against the dollar for the first time since May 2015, driven higher by capital controls and anaemic demand inside Russia for foreign currency.

Hungary's forint, central Europe's worst-performing currency, steadied at around 396 per euro, further distancing itself from a record low hit earlier this week, after the National Bank of Hungary raised its base rate by a whopping 185 basis points on Tuesday.

For GRAPHIC on emerging market FX performance in 2022, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2022, see https://tmsnrt.rs/2OusNdX

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see (Reporting by Sruthi Shankar in Bengaluru; Editing by Krishna Chandra Eluri)

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