Feb 22 (Reuters) – Emerging market stocks rose on Friday, on track to post weekly gains as investor sentiment buoyed mostly on trade talk progress between the United States and China, but data reflecting a deteriorating global economy kept gains in check.
U.S. Treasury yields rose after data showed signs of weaker than expected global growth, underpinning the dollar index and lifting developing world currencies which were positioned to end higher for the week.
The week saw optimism from U.S.-China trade talks, with reports suggesting that negotiators haggled on Thursday over the details of a set of agreements aimed at ending their trade war, just one week before a Washington-imposed deadline for a deal expires and triggers higher U.S. tariffs.
“As we move into the final stretch of the second round of U.S.-China trade talks, markets are reaching fever-pitch,” wrote Michael Every, senior Asia-Pacific strategist at Rabobank, in a note.
A cautious tone however crept in as manufacturing sector surveys in the United States, Europe and Japan predicted a contraction in production levels, renewing fears of slowing global growth.
“If they (markets) weren’t already nervous at the prospect of things going wrong, the slew of weak data from the U.S. and global manufacturing were a stark reminder that things are already less than rosy,” Every added.
MSCI’s index for emerging market stocks rose 0.3 percent with mainland China shares rallying as optimism over trade talks reasserted itself, pushing the blue-chip index 2 percent higher, pacing it for its strongest week since November 2015.
Other Asian indices also rose but those in India and Indonesia slipped, while bourses in Moscow, Istanbul and Johannesburg, all gained.
A soft dollar helped lift most emerging market currencies with South Africa’s rand leading gains, putting it on track to end a week marked by the annual budget higher, after Moody’s signalled the nation’s spending plans didn’t weaken its policy credibility.
The rouble firmed slightly, gaining support from higher oil prices and month-end taxes that boosted demand for the Russian currency.
China’s yuan inched lower but still looked poised for its largest weekly gain since early January, while South Korea’s won was on track to register its first weekly gain in four weeks. In emerging Europe, most currencies were higher against the euro, with the Polish Zloty set to register its best weekly gains this year following the release of retail figures on Thursday showing strong growth in January.
For GRAPHIC on emerging market FX performance 2019, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance 2019, see tmsnrt.rs/2OusNdX
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