EMERGING MARKETS-EMEA stocks, FX edge lower as risk rally pauses

  • Reuters
  • Stock Market News
EMERGING MARKETS-EMEA stocks, FX edge lower as risk rally pauses
Credit: © Reuters.

* Turkish lira edges higher, stocks at record peak

* Russian rouble lags EMEA peers on weak oil

* MSCI EM FX index falls from record high

By Ambar Warrick

Jan 4 (Reuters) - Most emerging market stocks and currencies in Europe, Middle East and Africa edged back on Tuesday after recent gains, as a continued surge in global coronavirus cases and uncertainty over U.S. politics dampened investors' appetite for risk.

The MSCI's index of emerging market currencies .MIEM00000CUS traded about 0.2% lower after briefly touching a record high, with the bulk of initial support coming from China's yuan CNY=CFXS . Optimism over an economic recovery in 2021 had seen emerging market currencies rally on the first day of the year.

But a fresh wave of coronavirus-related lockdowns across the globe, especially in Britain, swiftly dampened spirits, while investors were also watching two U.S. Senate run-off races, which are expected to determine the future of President-elect Joe Biden's political agenda.

Russia's rouble RUB= lagged its EMEA peers, falling nearly 1% in tandem with a recent slide in oil prices. O/R

Despite the renewed caution the dollar - often a refuge in uncertain times - remained under pressure, as markets began to price in an eventual economic bounce back this year through the release of vaccines and unprecedented amounts of stimulus.

"The path of least resistance for equities and other risk-linked assets may be to the upside, while safe havens are likely to come under renewed selling interest," said Charalambos Pissouros, senior market analyst at JFD Group.

"The coronavirus vaccinations, the Brexit trade accord, the passage of the U.S. spending bill, and a Biden Presidency, are a cocktail of developments that could keep the broader market sentiment supported in the foreseeable future."

Most central European currencies retreated against the euro.

Turkey's lira TRY= was among the few outliers for the day, rising slightly after higher-than-expected inflation figures on Monday raised expectations of monetary policy remaining tight in the mid-term. Turkish stocks .XU100 hit a record high.

Most other EMEA stocks edged lower, with Russian stocks .IMOEX retreating from a record high.

In the Middle East, markets were watching negotiations between Gulf leaders, which were expected to end a long-running dispute with Qatar. tensions in the region were elevated after Iran said it had resumed 20% uranium enrichment at an underground nuclear facility, breaching a 2015 pact with major powers. For GRAPHIC on emerging market FX performance in 2021, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2021, see https://tmsnrt.rs/2OusNdX

For TOP NEWS across emerging markets CENTRAL EUROPE market report, see CEE/

For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB

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