Sept 13 (Reuters) – Emerging market stocks slipped on Wednesday as a spike in oil prices fuelled fears of persistent price pressures ahead of a key U.S. inflation reading that could determine whether the Federal Reserve is close to the end of its rate hiking cycle.
MSCI’s index for emerging market equities .MSCIEF was down 0.2% by 0906 GMT, falling for the second straight session.
After a strong start to the week on optimism around upbeat economic data from China, emerging market stocks have come under pressure in the run-up to the U.S. consumer price index reading for August as any upside in inflation expectations could add to worries that rates will stay higher for longer.
The data, expected at 8:30 a.m. ET (1230 GMT) is likely to show annual CPI rose about 3.6% last month, a Reuters poll showed, after climbing 3.2% in July, though core inflation is expected to have eased.
A stronger-than-expected core inflation reading “will probably lay the groundwork for a reasonably hawkish FOMC meeting this time next week, where despite unchanged rates, the Fed will (through its dot plots) hold out the threat of one further hike this year,” ING strategists said in a note.
Clouding the outlook for inflation further, oil prices held on to a 10-month peak hit the previous day, with the recent shutdowns of oil ports in Libya adding to supply concerns. O/R
On Wednesday, equities in China .CSI300 fell 0.6% while the yuan CNY=CFXS firmed against the dollar.
China’s central bank will boost demand and support a modest rebound in prices, the Financial News, a publication run by the People’s Bank of China (PBOC) said on Wednesday, citing an unnamed senior central bank official.
Amundi, Europe’s largest asset manager, said on Wednesday it had turned neutral on Chinese equities in the latest sign of a shift in investor sentiment towards the world’s second biggest economy.
Broader EM currencies .MIEM00000CUS were flat, with the South African rand ZAR= down 0.2%, while the Russian rouble RUBUTSTN=MCX weakened past 96 to the dollar, pulling back from near six-week highs.
The Hungarian forint EURHUF=R was up 0.1% against the euro ahead of minutes from the Hungarian central bank’s August policy meeting where it cut its one-day deposit rate by 100 basis points to 14.00%.
The Romanian leu EURRON= firmed 0.2% versus the euro after data showed inflation stood at 9.43% in August, above market expectations of 9.15%.
In other news, global ratings agency Moody’s cut its outlook on Gabon to “negative” from “stable”, citing heightened political and government liquidity risks following last month’s coup.
(Reporting by Amruta Khandekar and Johann M Cherian in Bengaluru; Editing by Jacqueline Wong)
