Emerging stocks fell and currencies weakened on Thursday after minutes from the U.S. Federal Reserve clobbered risk appetite, while investors monitored a Czech central bank meeting to see if it will abandon the cap on the crown. MSCI's benchmark equities index fell 0.7 percent, tracking losses in developed markets with bourses across Asia and emerging Europe selling off. Hong Kong shares fell 0.6 percent, Polish stocks 0.7 percent and Russian dollar-denominated stocks 0.5 percent. Currencies were also mainly on the backfoot with the Russian rouble retreating from a near 21-month high touched on Wednesday while the Turkish lira weakened 0.4 percent to three-week lows. Sentiment soured overnight when minutes from the Fed's last meeting showed most policymakers thought the U.S. central bank should begin trimming its $4.5 trillion balance sheet later this year, much earlier than many had expected. Disappointing data added to the bearish mood, with activity in China's services sector expanding at its weakest pace in six months. The yuan dipped against the dollar but Chinese shares ended at a four-month high, bolstered by the government's plans for a new economic zone. In Europe, the focus was on a Czech central bank meeting to find out whether policymakers would scrap the cap on the crown, which prevents the currency from firming past 27 to the euro and has been in place since November 2013. Policymakers had pledged to keep the cap in place until the end of March. According to a Reuters poll, the crown is expected to gain 5 percent in 12 months. The crown's implied rate in the one-month forwards market is trading at 26.9 per euro and in the three-month forwards market it is 26.7 per euro, the highest since late 2013. "It could happen at any time," said Kaan Nazli, senior vice president at Neuberger Berman. "They have a pretty strong balance sheet – they are producing current account surpluses - and if you look at the fundamental value of the crown it has been strengthening over the time that they have been keeping it at a weaker point." The South African rand bucked the trend, firming 0.4 percent after the ruling ANC party rejected calls for President Jacob Zuma to quit. The rand touched three-month lows on Tuesday, pressured by political turmoil and a ratings downgrade to junk. A parliamentary motion of no confidence against Zuma has been scheduled for April 18, but previous no confidence motions have failed as the ANC has a commanding majority. "It looks like the ANC is siding with the president but clearly a lot of people and groups from the wider ANC coalition are against the president..., which basically means the rest of the year we will have continued headline risk," said Nazli. "There might be more rating downgrades down the line; it is very likely that it could go to junk in three to six months from now on the external rating." Bonds remained under pressure, with the average yield spread of South African sovereign bonds over U.S. Treasuries on the JP Morgan EMBI Global Diversified index rising 3 basis points (bps) to 279 bps. Earlier in Asia, Indian stocks retreated from record highs ahead of a central bank meeting at which it is expected to keep rates at 6.25 pct, according to a Reuters poll. India's services sector continued to recover in March from the shock demonetisation, expanding at its fastest since October. For GRAPHIC on emerging market FX performance 2017, see http://tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2017, see http://tmsnrt.rs/2dZbdP5 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 962.55 -6.67 -0.69 +11.63 Czech Rep 978.33 -2.45 -0.25 +6.15 Poland 2237.16 -16.48 -0.73 +14.85 Hungary 32400.94 -4.19 -0.01 +1.24 Romania 8215.04 +13.21 +0.16 +15.95 Greece 669.01 -0.96 -0.14 +3.94 Russia 1147.66 -4.83 -0.42 -0.41 South Africa 45843.20 -306.65 -0.66 +4.42 Turkey 88775.35 -262.10 -0.29 +13.61 China 3281.60 +11.29 +0.35 +5.73 India 29874.31 -99.93 -0.33 +12.20 Currencies Latest Prev Local Local close currency currency % change % change in 2017 Czech Rep 27.02 27.03 +0.06 -0.04 Poland 4.24 4.23 -0.11 +3.93 Hungary 310.32 310.21 -0.04 -0.48 Romania 4.52 4.53 +0.09 +0.26 Serbia 123.73 123.75 +0.02 -0.31 Russia 56.40 56.31 -0.15 +8.63 Kazakhstan 312.59 311.66 -0.30 +6.74 Ukraine 27.04 27.04 -0.00 -0.15 South Africa 13.73 13.79 +0.46 +0.00 Kenya 103.15 103.11 -0.04 -0.76 Israel 3.65 3.65 -0.09 +5.54 Turkey 3.71 3.70 -0.39 -4.98 China 6.90 6.89 -0.11 +0.63 India 64.96 64.87 -0.14 +4.59 Brazil 3.12 3.12 -0.06 +4.23 Mexico 18.83 18.81 -0.07 +10.03 Debt Index Strip Spd Chg %Rtn Index Sov'gn Debt EMBIG 333 1 .03 7 70.38 1 (Additional reporting by Karin Strohecker)
(This article has not been edited by DNA's editorial team and is auto-generated from an agency feed.)
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