EMERGING MARKETS-Stocks eye best day in three weeks on Powell’s dovish comments

PUBLISHED: Thu, 25 Feb 2021 10:02:22 GMT

* Tech-heavy bourses lead gains

* Currencies mixed despite weaker dollar

By Sruthi Shankar

Feb 25 (Reuters) – Emerging market shares were on course to record their best day in three weeks on Thursday, tracking gains in global equities, with bourses in South Korea, Taiwan and South Africa jumping on hopes that global borrowing costs will remain lower for longer.

MSCI’s benchmark EM stocks index, which spans 27 countries, gained 1.4%, after falling 5% from its all-time high over the past week.

South Korea’s KOSPI jumped 3.5%, lifted by semiconductor heavyweights, while bourses in Taiwan, Hong Kong, South Africa and Turkey all gained more than 1%.

Russia’s rouble-denominated MOEX index lagged its peers, rising 0.7%, but a Reuters poll showed the market will hit all-time highs this year, boosted by strong commodity prices, record low interest rates and a business activity surge.

Global stocks climbed as U.S. Federal Reserve Chair Jerome Powell reiterated on Wednesday that the central bank would not tighten policy until the economy is clearly improving, and will look through any near-term spike in inflation.

“I assume the bull run is likely to continue for Q1 and Q2, but not necessarily in a straight line,” Hussein Sayed, chief market strategist at FXTM wrote in a note.

“Despite the assurances from Chair Powell, equity investors will need to keep a close eye on long-term yields.”

While stock markets showed relief, government bond yields globally continued to climb on expectations of rising inflation amid prospects of more U.S. fiscal stimulus.

JPMorgan cut its emerging forex exposure to “marketweight” from “overweight” on Wednesday, saying a sooner-than-expected rise in U.S. 10-year real yields will put pressure on some emerging market assets.

Developing world currencies were mixed despite the dollar weakening against its major peers.

The South African rand gave back all of its gains made after the government on Wednesday released its annual budget, which assured some investors that the country could avoid a full fiscal crisis.

The currency fell 1.3% against the dollar, with credit ratings agency Fitch saying the country still faced “severe challenges” to implementing fiscal consolidation.

The Turkish lira headed lower for a fourth day, as data showed economic confidence index slipped 0.5% month-on-month in February, as pandemic fallout continues to weigh.

Mexico’s peso dropped almost 1% as Moody’s warned that the country’s fiscal deficit will likely widen to 4.1% of gross domestic product this year, with ongoing support for ailing state oil company Pemex driving up debt.

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

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see (Reporting by Sruthi Shankar in Bengaluru; Editing by Rashmi Aich)

(c) Copyright Thomson Reuters 2021. Click For Restrictions – https://agency.reuters.com/en/copyright.html

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