EM stocks down over 1%
Fed meeting minutes due 1900 GMT
Turkish manufacturers’ business confidence rises
G20 meet kicks off in India
Russia prepares to approve suspension of New START treaty
By Shubham Batra and Amruta Khandekar
Feb 22 (Reuters) – Emerging market stocks fell for a second session on Wednesday as investors grew concerned about the prospects of interest rates staying higher for longer, while traders were also cautious ahead of the minutes of the latest U.S. Federal Reserve meeting.
The minutes due at 1900 GMT will come at a time when hawkish rhetoric from policymakers and signs of economic resilience have spurred worries that major central banks could keep raising interest rates for longer.
The MSCI EM equities index slumped 1.3%, with geopolitical tensions ahead of the Ukraine war’s one-year anniversary also weighing on sentiment, while regional currencies fell 0.3% as the dollar firmed.
“We got these risks (such as) the Ukraine conflict, but we also see that the Fed and the ECB (European Central Bank) are more hawkish than we expected at the beginning of the year,” said Frantisek Taborsky, EMEA FX & FI strategist at ING.
“The first quarter is a kind of a repricing quarter to see where is the peak for the global central banks, but the rest of the year, it’s emerging market time.”
Russia’s rouble was up 0.6% against the dollar, retreating from near 10-month lows on the prospect of upcoming month-end tax payments, but gains were limited by the threat of more sanctions against Moscow expected this week.
The Russian parliament was set to rubber-stamp President Vladimir Putin’s decision to suspend Moscow’s participation in the New START treaty aimed at reducing usage of nuclear arms.
U.S. President Joe Biden and Putin have been sparring verbally, presenting starkly different views of the world and the Ukraine war, with Biden promising to defend democracies and Putin asserting the West was a threat to Russia.
Among other currencies, Turkish lira was flat from its previous close as business confidence among Turkish manufacturers rose to 102.4 points in February compared with 101.7 points in the prior month.
South Africa’s rand fell 0.5% against the dollar, hitting its lowest level this year, ahead of Finance Minister Enoch Godongwana’s budget presentation before the parliament later in the day.
In central and eastern Europe, Hungary’s forint and the Polish zloty fell 0.2% each against the euro.
Elsewhere in emerging markets, India’s Reserve Bank of India will release minutes of its latest monetary policy meeting held earlier in February.
India reiterated its stance on the war in Ukraine that it was time for dialogue and diplomacy as the Group of 20 (G20) meeting kicked off near the southern city of Bengaluru on Wednesday. (Reporting by Shubham Batra and Amruta Khandekar in Bengaluru; Editing by Sherry Jacob-Phillips)