By Claire Milhench
LONDON, Aug 1 (Reuters) - Weak factory activity data and a U.S. proposal for higher tariffs on $200 billion of Chinese imports weighed on investor appetite for emerging market stocks on Wednesday while a stronger dollar created headwinds for currencies.
MSCI's benchmark emerging stocks index .MSCIEF fell 0.2 percent in early trade after discouraging data out of China set the tone, before recovering to trade flat in European hours.
A private survey showed that Chinese manufacturing grew at the slowest pace in eight months in July as export orders declined in their worst slump since June 2016. mainland shares .CSI300 tumbled two percent to a near two-week low, their worst daily loss in a month. Hong Kong shares .HSI also fell 0.9 percent while the yuan CNY= weakened 0.2 percent offshore CNH= . The yuan has just suffered its worst four-month fall on record. sentiment was also crushed by Washington's plans to propose higher tariffs of 25 percent on $200 billion worth of Chinese imports, after initially setting them at 10 percent.
This revived fears of an escalating trade war, even as Bloomberg reported that the United States and China were seeking to restart negotiations. worry is that tit-for-tat tariffs will crimp global growth, by affecting integrated supply chains and hitting export-oriented emerging economies hard.
"The threat of even higher tariffs is quite worrisome, to try to bring the Chinese to the negotiating table," said Koon Chow, a strategist at UBP, adding it was not just negative for emerging markets, as ultimately the U.S. consumer would suffer as well.
Other manufacturing surveys from across emerging Asia told a similar story to China's, with South Korean factory activity contracting for a fifth month, marking the worst slump since November 2016 while Indian factory growth also eased. emerging Europe, Russian Turkish and Polish manufacturing activity also slowed. definitely disappointing and sends a bit of a chill across the whole narrative that EM is in pretty good shape," said Chow. "You are getting a broader chill in the global manufacturing chain, emanating from China itself, which makes for more difficult times."
Outperformers included Indonesia .JKSE , which rose 1.6 percent, and South Korea .KS11 , up 0.5 percent, with the latter's July exports up 6.2 percent year-on-year. Taiwan .TWII also got a boost, up 0.4 percent to two-week highs after Apple Inc. AAPL.O beat expectations for its quarterly results. were mainly weaker, with Turkey's lira TRY= among the biggest fallers, down 0.4 percent, a day after the central bank sharply raised its inflation forecast for this year and next. Turkish stocks .XU100 fell 0.5 percent.
Investors have been unnerved by the dispute between Turkey and the United States over an American pastor, which has raised the threat of U.S. sanctions against Ankara. Africa's rand ZAR=D3 slipped 0.2 percent after President Cyril Ramaphosa said the ruling party would press ahead with plans for the expropriation of land without compensation. Indian rupee INR= also eased 0.2 percent ahead of a central bank meeting at which the bank may raise rates again by 25 basis points to 6.5 percent. rupee PKR= firmed 0.9 percent although the U.S. has warned against any potential IMF bailout that pays off Chinese loans to Pakistan. emerging Europe, Hungary's forint EURHUF= was the big underperformer, weakening 0.2 percent against the euro. GRAPHIC on emerging market FX performance 2018, see http://tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2018, see http://tmsnrt.rs/2dZbdP5
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 ) Emerging Markets Prices from Reuters
Net Chg % Chg % Chg
Morgan Stanley (NYSE: MS )
Emrg Mkt Indx .MSCIEF 1087.22
-0.24 -0.02 -6.15
+0.69 +0.06 +1.38
-3.69 -0.16 -6.61
35830.43 +88.37 +0.25 -9.01
7993.80 +16.06 +0.20 +3.10
-0.81 -0.11 -5.23
-4.80 -0.41 +1.20
.JTOPI 51279.91 -35.09 -0.07 -2.39
.XU100 96705.09 -247.14 -0.25 -16.15
2824.21 -52.19 -1.81 -14.60
.BSESN 37520.03 -86.55 -0.23 +10.17
close currency currency
% change % change
South Africa ZAR=
4.91 -0.46 -23.18
3.76 +0.04 -11.78
Index Strip Spd Chg %Rtn Index
Sov'gn Debt 11EML EMBIG 351
.02 7 81.62 1
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