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Asian shares mixed as corporate earnings loom

NEW YORK (Reuters) – Asian stocks were set for a mixed open on Wednesday, as an increase in new coronavirus cases in some parts of the world cast doubts over the economic recovery, leading some investors to cash in on recent gains ahead of earnings season.

Australian S&P/ASX 200 futures lost 0.50% in early trading, while Japan’s Nikkei 225 futures added 0.11%, and Hong Kong’s Hang Seng index futures rose 0.39%.

U.S. stocks fell on Tuesday, halting a five-day winning streak by the benchmark S&P 500 index, its longest this year, which had been driven by better-than-expected economic data.

Following the recent rally, the declines looked like a consolidation, with the markets largely in “wait and see mode” ahead of the upcoming earnings session, said NAB economist Tapas Strickland.

“It will be important to watch the number of U.S. deaths in coming weeks and whether greater questions will be asked about the extent of necessary restrictions,” he added.

The United States reported tens of thousands of new coronavirus infections, prompting New York to expand its travel quarantine for visitors from three more states, while Florida’s greater Miami area rolled back its reopening.

The surge has made business owners “nervous again,” Atlanta Federal Reserve Bank President Raphael Bostic said on Tuesday. “There is a real sense this might go on longer than we have planned for,” he said.

Coronavirus cases were also on the rise in the Australian state of Victoria, which led to lockdown measures being reimposed in Melbourne, the country’s second-biggest city.

“The second wave of infection will see Victorian economic activity fall sharply and it will continue to lag the rest of Australia,” said NAB economist Kaixin Owyong.

Victoria makes up around a quarter of Australian economic activity, she said.

MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.78% lower.

The Dow Jones Industrial Average fell 1.51%, the S&P 500 lost 1.08%, and the Nasdaq Composite dropped 0.86%.

E-mini futures for the S&P 500 were up 0.13%.

Concern over the rise in new coronavirus cases helped lift safe-haven assets, including the U.S. dollar, which was 0.15% higher at 96.889, against a basket of currencies.

The benchmark 10-year yield was down at 0.6397%, from 0.648% late on Monday.

Spot gold jumped 0.7% to $1,796.08 per ounce.

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Stocks, oil slip but Chinese stocks rumble on

NEW YORK (Reuters) – Investor caution over renewed coronavirus lockdowns snuffed out a five-day rally in most world equity markets on Tuesday and weighed on oil prices, though it was not enough to halt a hot streak in Chinese stocks.

The dollar edged higher as risk currencies such as the Australian dollar took a breather from recent gains and gold dipped as investors booked profits after bullion rallied to a near eight-year peak, trading around $1,780 an ounce.

Equity bourses in London, Paris and Frankfurt fell 1% or more, while stocks fell far less on Wall Street, with the Nasdaq trading flat to slightly higher.

U.S. Treasury yields ticked lower as a rising COVID-19 caseload raised concerns about economic reopening plans. The greater Miami area in Florida became the latest U.S. coronavirus hot spot to roll back its reopening. Cases surged nationwide by the tens of thousands and the U.S. death toll topped 130,000.

Investors remain concerned about the U.S. economic outlook, said Jim Barnes, director of fixed income for Bryn Mawr Trust in the Philadelphia suburb of Berwyn.

“Economic conditions still have a long way to go to get back to pre-crisis levels,” he said.

MSCI’s all-country world index, which tracks shares in 49 nations, fell 1.64 points, or 0.3%, while Europe’s broad FTSEurofirst 300 index dropped 0.64%.

On Wall Street, the Dow Jones Industrial Average fell 165.47 points, or 0.63%, to 26,121.56 and the S&P 500 lost 1.98 points, or 0.06%, to 3,177.74. But the Nasdaq Composite added 52.18 points, or 0.5%, to 10,485.83. The Nasdaq set a fresh intraday peak.

Lockdown measures were also reimposed in Melbourne, Australia, confining its nearly 5 million residents to all but essential travel for another six weeks.

“Just when many parts of the world looked to have got to grips with the coronavirus pandemic, many jurisdictions re-imposed lockdowns to contain a surge in new cases,” said Luca Paolini, chief strategist at Pictet Asset Management.

Corporate earnings are expected to fall by about 20% percent this year following the deepest recession in more than a century. Pictet expects a 30% to 40% slump.

“But that does not mean equity and corporate bond markets are due a sharp fall,” Paolini said, predicting the U.S. Federal Reserve will inject a further $1.3 trillion of stimulus this year and the European Central Bank will add another 1.1 trillion euros ($1.24 trillion).

The euro was last down 0.20% at $1.1285.

The euro zone economy will drop into a deeper recession this year than previously expected and take longer to rebound, the European Commission forecast. Expectations are for a record 8.7% slump and 6.1% recovery in 2021. The commission had forecast in May a 7.7% downturn and a 6.3% rebound in 2021.

The dollar index, which tracks the greenback versus a basket of six currencies, rose 0.22% to 96.942. The yen was up 0.20% at $107.5700.

Analysts said signals from the Chinese government through a state-sponsored journal on “fostering a healthy bull market”, published on Monday, had helped the buying binge in Chinese shares.

Copper prices soared to their highest in more than five months due to strong demand prospects in top consumer China and worries about supplies from Chile, the world’s largest producer of the red metal.

Shanghai’s blue-chip index was sputtering by the close after adding to its 15% gains over the past week.

(Graphic: World’s biggest stock markets since start of 2020, here)

(Graphic: Coronavirus and financial markets, here)

(This story refiles to fix dropped letters in headline.)

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Europe stalls after China's bull charge rumbles on

LONDON (Reuters) – A five-day charge by world stocks fizzled on Tuesday as caution about renewed coronavirus lockdowns took hold again, though it was not enough to completely douse China’s July hot streak.

London, Paris and Frankfurt were down around 1% in early trading as the bumpier conditions shifted investors back to the dollar and the region’s government bonds. [GVD/EUR][/FRX]

Tokyo, Hong Kong and Seoul had all lost ground in Asian trading, while Shanghai’s high-flying blue-chip index was sputtering by the close after adding to the 15% gains it has made over the last week. [.SS]

“Just when many parts of the world looked to have got to grips with the coronavirus pandemic, many jurisdictions re-imposed lockdowns to contain a surge in new cases,” said chief strategist at Pictet Asset Management Luca Paolini.

He said corporate earnings prospects were clearly a concern. The consensus is that profits globally will decline by about 20% percent this year following the deepest recession in more than a century, although Pictet is predicting a 30% to 40% slump.

“But that does not mean equity and corporate bond markets are due a sharp fall,” Paolini said, predicting the U.S. Federal Reserve will inject another $1.3 trillion of stimulus this year and the ECB will add an extra 1.1 trillion euros.

Analysts said signals from the Chinese government through a state-sponsored journal on the importance of “fostering a healthy bull market” published on Monday had helped the buying recent binge in Chinese shares.

The current China rally has echoes of the past, especially during 2007 and in the buying spree that followed the crash in 2015 that was largely driven by Chinese retail investors.

“Shades of John F. Kennedy’s ‘Ask not what your country can do for you’ inauguration speech here and as close as you might get to a Chinese government ‘put’ as anything the Fed has done to date vis-à-vis the U.S. stock (and credit) markets,” said Ray Attrill, head of FX strategy at NAB, in a research note.

A sharp rebound in U.S. services industry activity in June, almost returning to pre-pandemic levels, also helped to whet investors’ risk appetite.

Graphic: ChiNext powers ahead here

DEMAND DESTRUCTION

New coronavirus cases surged in several states, however, forcing some restaurants and bars to close again in a setback to the budding recovery that helped check gains in risk assets.

Lockdown measures were reimposed in Australia’s second biggest city Melbourne on Tuesday too, confining its residents to all but essential travel for another six weeks.

In the currency market, the Chinese yuan edged to its highest levels in nearly four months. The renminbi rose 0.1% to 7.0115 per dollar though it was small scale compared to Monday’s near 1% jump.

“The yuan is supported by the risk-on mood in the Chinese share market despite lingering uncertainties over the U.S.-China relations and an anticipated slow pace of recovery,” said Ei Kaku, senior strategist at Nomura Securities.

Other major currencies were struggling as the dollar regained traction. The yen was flat at 107.41 to the dollar, the euro slipped back under $1.13 and all the way to $1.1275, while the Aussie dollar dropped 0.5% after headlines of Melbourne’s lockdown measures broke..

Gold dipped slightly in metals, but was still a near an eight-year peak at $1776 per ounce. Copper was a touch weaker in London trading too, having hit a fresh five-month high as part of the China charge in Asia.

Oil prices were also struggling in line with most commodity markets. Brent crude lost nearly 1% to $42.69 per barrel, while U.S. West Texas Intermediate crude fell to $40.24.

With 16 U.S. states reporting record increases in new COVID-19 case in the first five days of July, according to a Reuters tally, there is renewed concern about demand for fuel in the world’s biggest oil-consuming country.

Florida is reintroducing some limits on economic reopenings to grapple with rising cases. California and Texas, two of the most populous and economically crucial U.S. states, are also reporting high infection rates.

“The potential for demand destruction as lockdown reinstatement looks more likely are combining with concerns about OPEC+ discipline to weigh on oil prices,” said CMC Markets’s Chief Market Strategist Michael McCarthy in Sydney in an email.

Graphic: World’s biggest stock markets since start of 2020 here

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World shares rally to four-week highs as investors bet on China revival

LONDON (Reuters) – Global stock markets rallied to four-week highs on Monday as investors counted on a revival in Chinese activity to boost global growth, even as surging coronavirus cases delayed business re-openings across the United States.

MSCI’s All-Country World Index, which tracks shares across 49 countries, rose 0.7% to its highest since June 6 after the start of European trading.

European shares jumped, with the pan-European STOXX 600 index rising 1.64%. Stocks exposed to China, like carmakers, industrials, energy firms and luxury goods makers rose strongly, while banks also rallied. [.EU]

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 1.6% to its highest since February, with the bullish sentiment spilling into other markets.

E-Mini futures for the S&P 500 firmed 1.2%.

Chinese blue chips jumped 5.7% on top of a 7% gain last week to their loftiest level in five years. Even Japan’s Nikkei, which has lagged with a soft domestic economy, managed a rise of 1.8%.

Among the reasons investors cited for the buying was improving economic data – UBS noted Citi’s Economic Surprise Index for the U.S. has risen to its highest level on record. The index measures how well economic data releases are faring relative to consensus forecasts.

Some cited an editorial in the China Securities Journal, which said on Monday that China needed a bull market to help fund its rapidly developing digital economy.

“We advise against regarding uncertainty as a reason for exiting markets. Instead, we see ways for investors to cope with uncertainty – including averaging into markets – or even take advantage of volatility,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

In Hong Kong, Jefferies chief global equity strategist Sean Darby said the positive sentiment towards Asian markets was the result of better than expected regional economic data and elevated liquidity levels.

“All of the global monetary policy indicators are flashing green right now. It is very loose and that should mean markets which have underperformed should do well,” Darby told Reuters.

“The dollar has also been weaker over the past five days so emerging markets, led by China, normally do well on that back of that.”

Most markets gained ground last week as a raft of economic data from June beat expectations, although the resurgence of coronavirus cases in the United States is clouding the future.

In the first four days of July alone, 15 states have reported record increases in new cases of COVID-19, which has infected nearly 3 million Americans and killed about 130,000, according to a Reuters tally.

Analysts estimate that reopenings affecting 40% of the U.S. population have now been wound back.

“Markets will have to climb a wall of worry in July as economic activity likely softens from the V-shaped recovery seen over recent months,” said Robert Rennie, head of financial market strategy at Westpac.

“We must remember too that U.S. and China relations are deteriorating noticeably.”

Two U.S. aircraft carriers conducted exercises in the disputed South China Sea on Saturday, the U.S. Navy said, as China also carried out military drills that have been criticised by the Pentagon and neighbouring states.

The risks, combined with unceasing stimulus from central banks, have kept sovereign bonds supported in the face of better economic data. While U.S. 10-year yields edged up to 0.7% on Monday, well off the June top of 0.959%.

Germany’s benchmark 10-year Bund yield edged up, pulling further away from recent five-week lows in the face of rallying equity markets. [GVD/EUR]

Analysts at Citi estimate global central banks are likely to buy $6 trillion of financial assets over the next 12 months, more than twice the previous peak.

Major currencies have been largely rangebound with the dollar index down 0.3% at 96.894, having spent an entire month in a snug band of 95.714 to 97.808.

The dollar was a shade firmer on the yen at 107.57 on Monday, while the euro rose above the $1.13 mark.

In commodity markets, gold has benefited from super-low interest rates across the globe as negative real yields for many bonds make the non-interest paying metal more attractive.

Spot gold traded at $1,776.21 per ounce, just off last week’s peak of $1,788.96. [GOL/]

Oil prices were mixed with Brent crude futures up 1.87% at $43.58 a barrel, while U.S. crude gained 0.84% to $40.99 amid worries the surge in U.S. coronavirus cases would curb fuel demand. [O/R]

($1 = 7.0429 yuan)

Graphic: World FX rates in 2020 here

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World shares rally to four-week highs as investors bet on China revival

LONDON (Reuters) – Global stock markets rallied to four-week highs on Monday as investors counted on a revival in Chinese activity to boost global growth, even as surging coronavirus cases delayed business re-openings across the United States.

MSCI’s All-Country World Index, which tracks shares across 49 countries, rose 0.7% to its highest since June 6 after the start of European trading.

European shares jumped, with the pan-European STOXX 600 index rising 1.64%. Stocks exposed to China, like carmakers, industrials, energy firms and luxury goods makers rose strongly, while banks also rallied. [.EU]

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 1.6% to its highest since February, with the bullish sentiment spilling into other markets.

E-Mini futures for the S&P 500 firmed 1.2%.

Chinese blue chips jumped 5.7% on top of a 7% gain last week to their loftiest level in five years. Even Japan’s Nikkei, which has lagged with a soft domestic economy, managed a rise of 1.8%.

Among the reasons investors cited for the buying was improving economic data – UBS noted Citi’s Economic Surprise Index for the U.S. has risen to its highest level on record. The index measures how well economic data releases are faring relative to consensus forecasts.

Some cited an editorial in the China Securities Journal, which said on Monday that China needed a bull market to help fund its rapidly developing digital economy.

“We advise against regarding uncertainty as a reason for exiting markets. Instead, we see ways for investors to cope with uncertainty – including averaging into markets – or even take advantage of volatility,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

In Hong Kong, Jefferies chief global equity strategist Sean Darby said the positive sentiment towards Asian markets was the result of better than expected regional economic data and elevated liquidity levels.

“All of the global monetary policy indicators are flashing green right now. It is very loose and that should mean markets which have underperformed should do well,” Darby told Reuters.

“The dollar has also been weaker over the past five days so emerging markets, led by China, normally do well on that back of that.”

Most markets gained ground last week as a raft of economic data from June beat expectations, although the resurgence of coronavirus cases in the United States is clouding the future.

In the first four days of July alone, 15 states have reported record increases in new cases of COVID-19, which has infected nearly 3 million Americans and killed about 130,000, according to a Reuters tally.

Analysts estimate that reopenings affecting 40% of the U.S. population have now been wound back.

“Markets will have to climb a wall of worry in July as economic activity likely softens from the V-shaped recovery seen over recent months,” said Robert Rennie, head of financial market strategy at Westpac.

“We must remember too that U.S. and China relations are deteriorating noticeably.”

Two U.S. aircraft carriers conducted exercises in the disputed South China Sea on Saturday, the U.S. Navy said, as China also carried out military drills that have been criticised by the Pentagon and neighbouring states.

The risks, combined with unceasing stimulus from central banks, have kept sovereign bonds supported in the face of better economic data. While U.S. 10-year yields edged up to 0.7% on Monday, well off the June top of 0.959%.

Germany’s benchmark 10-year Bund yield edged up, pulling further away from recent five-week lows in the face of rallying equity markets. [GVD/EUR]

Analysts at Citi estimate global central banks are likely to buy $6 trillion of financial assets over the next 12 months, more than twice the previous peak.

Major currencies have been largely rangebound with the dollar index down 0.3% at 96.894, having spent an entire month in a snug band of 95.714 to 97.808.

The dollar was a shade firmer on the yen at 107.57 on Monday, while the euro rose above the $1.13 mark.

In commodity markets, gold has benefited from super-low interest rates across the globe as negative real yields for many bonds make the non-interest paying metal more attractive.

Spot gold traded at $1,776.21 per ounce, just off last week’s peak of $1,788.96. [GOL/]

Oil prices were mixed with Brent crude futures up 1.87% at $43.58 a barrel, while U.S. crude gained 0.84% to $40.99 amid worries the surge in U.S. coronavirus cases would curb fuel demand. [O/R]

($1 = 7.0429 yuan)

Graphic: World FX rates in 2020 here

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Asia shares at four-month peak, stimulus trumps virus fears

SYDNEY (Reuters) – Asian shares held near four-month highs on Monday as investors counted on super-cheap liquidity and fiscal stimulus to sustain the global economic recovery even as surging coronavirus cases delayed reopenings across the United States.

MSCI’s broadest index of Asia-Pacific shares outside Japan inched up 0.05%, having hit its highest since February.

Eyes were on Chinese blue chips, which surged almost 7% last week to their loftiest level in five years. Japan’s Nikkei, however, has lagged with its domestic economy and was last up 0.4%.

E-Mini futures for the S&P 500 firmed 0.3%.

Most markets had gained ground last week as a raft of economic data from June beat expectations, though the resurgence of coronavirus cases in the United States is clouding the future.

In the first four days of July alone, 15 states have reported record increases in new cases of COVID-19, which has infected nearly 3 million Americans and killed about 130,000, according to a Reuters tally. [nL1N2EC043]

“It is very clear that the U.S. never got the COVID outbreak under control the way that other countries did. By reopening the economy too soon, we have seen a frightening increase in the pace of new cases,” said Robert Rennie, head of financial market strategy at Westpac.

Analysts estimate that reopenings impacting 40% of the U.S. population have now been wound back.

“So markets will have to climb a wall of worry in July as economic activity likely softens from the V-shaped recovery seen over recent months,” warned Rennie. “We must remember too that U.S. and China relations are deteriorating noticeably.”

Two U.S. aircraft carriers conducted exercises in the disputed South China Sea on Saturday, the U.S. navy said, as China also carried out military drills that have been criticised by the Pentagon and neighbouring states.[nL3N2EB00E]

The risks, combined with unceasing stimulus from central banks, have kept sovereign bonds supported in the face of better economic data, with U.S. 10-year yields holding at 0.67% and well off the June top of 0.959%.

Analysts at Citi estimate global central banks are likely to buy $6 trillion of financial assets over the next 12 months, more than twice the previous peak.

Major currencies have been largely range bound with the dollar index at 97.189 having spent an entire month in a snug band of 95.714 to 97.808.

The dollar was hardly changed at 107.59 yen on Monday, while the euro idled at $1.1260.

In commodity markets, gold has been benefiting from super-low interest rates across the globe as negative real yields for many bonds make the non-interest paying metal more attractive.

Spot gold traded at $1,776 per ounce just off last week’s peak of $1,788.96. [GOL/]

Oil prices were mixed in early trade with Brent crude futures up 15 cents at $42.95 a barrel, while U.S. crude eased 25 cents to $40.40. [O/R]

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Global Markets: COVID recovery vs COVID reality

LONDON (Reuters) – World shares inched towards a four-month high on Friday and industrial bellwether metal copper was set for its longest weekly winning streak in nearly three years, as recovering global data kept nagging coronavirus nerves at bay.

The market rally fuelled by record U.S. jobs numbers had largely blown itself amid a spike in U.S. COVID cases, though the fastest expansion in China’s services sector in over a decade and more stimulus ensured optimism remained.

Chinese shares had charged to their highest level in five years, helping the pan-Asian indexes to 4-month peaks, so the sight of European markets stalling early on took some traders by surprise.

Currency and commodity markets also had a subdued feel after an otherwise strong week for confidence-sensitive stalwarts such oil, copper, sterling and the Australian dollar, which all struggled on Friday.

“I think infection rates and fears of localised lockdowns have doused some of the enthusiasm,” said Societe Generale strategist Kit Jukes.

“We have three elements now; vaccine hopes, decent data in most places but also the return of infection rates which can make you nervous.”

Against a basket of currencies, the dollar rose slightly in early London trading. It was up less than 0.1% at 97.306 and still firmly on track for its biggest weekly fall since the first week of June.

The euro was down at $1.1226 and though it gained against the safe Swiss franc it fell versus the sometimes commodity-driven Norwegian crown.

S&P 500 futures were down 0.2% but volumes were lower than usual due to a U.S. markets holiday on Friday for Independence Day.

U.S. nonfarm payrolls surged by 4.8 million jobs in June, above the average forecast of 3 million jobs in June, thanks to rises in the hard-hit hospitality sectors.

But economists noted there were caveats to the upbeat headline figures.

The number of permanent job losers continued to rise, increasing by 588,000 to 2.9 million in June while the unemployment rate remains a chunky 7.6 percentage points above its February level. A Deutsche Bank analysis put the U.S. unemployment rate behind all its developed market peers barring Canada.

The recovery also faces more headwinds as a surge of new coronavirus infections prompts U.S. states to delay and in some cases reverse plans to let stores reopen and activities resume.

More than three dozen U.S. states saw increases in COVID-19 cases, with cases in Florida spiking above 10,000.

Nevertheless markets are largely overlooking the spikes, taking the view that overall the situation was still improving overall.

Ten-year German government bond yields are up 5 basis points this week and set for their biggest weekly rise in a month, though they nudged down on Friday to -0.44%. Riskier Italian yields fell to 1.26% as well though, which is their lowest since late March.

Oil prices also eased after an otherwise solid week. Brent crude fell 0.65% to $42.86 a barrel while U.S. crude dropped 0.66% to $40.38 a barrel. Both were around $25 this time two months ago.

Copper prices were poised for a seventh consecutive weekly gain, their longest winning streak in nearly three years, despite a slight easing on the day after top supplier Chile had assured traders about supply.

Three-month LME copper was hovering at $6,040 a tonne, more than $1,500 up from lows it ploughed to in March.

“The one issue that hangs over all the markets is will we see a surge in secondary infections that will trigger a second wave of national rather than regional shutdowns?” Malcolm Freeman, director of Kingdom Futures, wrote in a note.

(GRAPHIC: China recovery – here)

(GRAPHIC: COVID-19 in U.S. – here)

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EMERGING MARKETS-Stocks touch near 4-month high on upbeat data, currencies muted

* MSCI EM Stocks index set to jump over 3% for the week

* Spiking COVID-19 cases keep currencies constrained

* South African rand set to outperform EMEA FX for the week

By Ambar Warrick

July 3 (Reuters) – Emerging market stocks rose on Friday and were set to end the week higher on upbeat data from China and the United States, while currencies lagged as growing coronavirus cases dampened optimism about a swift global economic recovery.

The MSCI’s index of developing world stocks rose 0.9% to its highest level since March 6, but still trading about 10% below a pre-pandemic peak.

The index was on track to add more than 3% for the week, driven by strong economic readings across the globe, with Chinese factory activity and U.S. payroll data being particular highlights.

However, a spike in U.S. COVID-19 infections on Thursday undercut risk appetite. Emerging market currencies bore a measure of this caution, given that recent monetary easing in the space has made them less attractive than stocks.

“Markets may be trading in consolidating patterns due to the ongoing battle between those who see a faster-than-previously-thought economic recovery and those who are concerned over a second round of restrictions due to the re-acceleration of global infections,” Charalambos Pissouros, senior market analyst at JFD Group, wrote in a note.

South African and Hungarian stocks led gains in the EMEA region. Turkish stocks traded sideways, while the lira edged lower after inflation in the country climbed more than expected in June.

Turkey’s central bank had cited increased inflation when it unexpectedly halted a policy easing cycle last week.

“If inflation were not to cool down, the FX market would switch to discounting a much more deeply negative real interest rate than it is doing now – and this would imply more selling pressure on the lira,” Tatha Ghose, FX & EM Analyst at Commerzbank, wrote in a note.

South Africa’s rand rose about 0.3%, and was set to outperform its EMEA peers for the week after the country recorded its first current account surplus in 17 years.

Russia’s rouble was steady to the dollar, while the Hungarian forint and the Czech koruna both edged lower to the euro.

For GRAPHIC on emerging market FX performance in 2020, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2020, see 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

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Asian stocks set to follow U.S. jobs rally, China in focus

NEW YORK (Reuters) – Asian stocks were likely to track a firmer Wall Street session on Friday after strong U.S. jobs data although growing Sino-U.S. tensions and a worrying surge in coronavirus cases is likely to cap gains.

Japan’s Nikkei 225 futures rose 0.45% and Australia’s S&P/ASX 200 futures climbed 0.58%.

E-mini futures for the S&P 500 rose 0.14%.

“While June data reflected a big improvement in the U.S. labor market, the recent sharp acceleration in new virus cases plus the prospect of an end to unemployment benefits by the end of July are two big layers of uncertainty,” said NAB Markets analyst Rodrigo Catril, adding that the uptick in U.S. cases could mean extended headwinds for the labor market.

Wall Street ended Thursday higher following a record increase in payrolls and a decline in unemployment. U.S. markets are closed on Friday in observance of Independence Day.

However, investor focus is shifting to worsening strains between China and the United States.

More than 75 U.S. members of congress sent a letter to the President Donald Trump urging him to take make a formal determination on whether China’s treatment of Muslim Uighurs and other groups constitutes an atrocity.

The U.S. State Department also warned American companies including Amazon.com Inc, Walmart Inc and Apple Inc to check their supply chains and ensure they are not doing business with entities linked to alleged human rights abuses against Uighurs in China’s Xinjiang province.

Separately, Congress passed legislation seeking to punish banks that do business with Chinese officials who implement Beijing’s draconian new national security law on Hong Kong.

MSCI’s gauge of stocks across the globe gained 0.92%. The Dow Jones Industrial Average rose 0.36%, the S&P 500 gained 0.45% and the Nasdaq Composite added 0.52%.

The positive economic data also pushed oil prices higher.

Brent crude futures settled at $43.14 a barrel, rising $1.11, or 2.6%. U.S. West Texas Intermediate (WTI) crude futures settled at $40.65 a barrel, up 83 cents, or 2.1%.

Investors still embraced the safe-haven dollar and gold, which usually rise when risk appetite declines, as an acceleration in new COVID-19 cases across the country prompted fresh restrictions.

The dollar index rose 0.058%, with the euro up 0.01% to $1.1239.

The Japanese yen weakened 0.02% versus the greenback at 107.53 per dollar, while sterling last traded at $1.2468, up 0.02% on the day.

Spot gold rose 0.4% to $1,777.04 per ounce

U.S. Treasury yields ended the day lower ahead of the July 4 long weekend, with the benchmark 10-year yield fell 1.1 basis points at 0.6709%.

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EMERGING MARKETS-EMEA stocks rally, but currencies skittish ahead of U.S. payrolls

* Russian, Hungarian stocks lead gains

* MSCI EM stock index set for best day in over 2 weeks

* CEE currencies muted ahead of Eurozone data

By Ambar Warrick

July 2 (Reuters) – Emerging market stocks in Europe, the Middle East and Africa rose on Thursday as investors bet on a potential coronavirus vaccine, while currencies remained subdued ahead of key U.S. economic data.

The MSCI’s index of developing world equities added 1.8% and was set for its biggest daily gain in more than two weeks, as encouraging results from early-stage human trials of a COVID-19 vaccine from Pfizer and Germany’s BioNTech helped risk appetite.

Improving manufacturing activity surveys across the globe also spurred riskier buying, with Hungarian and Russian stock indexes leading gains in EMEA for the day.

Most EMEA currencies were muted, indicating that caution was still at the forefront, especially ahead of U.S. payroll data later in the day.

“Even though market participants seemed a little less risk-averse in view of the positive PMIs yesterday, they were not exactly euphoric,” Thu Lan Nguyen, FX & EM Analyst at Commerzbank, wrote in a note.

“First of all, the market has already largely priced in an economic recovery, and secondly, the survey-based economic indicators have to be taken with a pinch of salt.”

South Africa’s rand firmed against the U.S. dollar as markets awaited current account data from the country.

Central European currencies such as the Hungarian forint and the Polish zloty weakened against the euro, which was a touch firmer ahead of eurozone inflation and unemployment data.

Russia’s rouble took some support from stronger oil prices. Stocks in the country also rose after a holiday, after Russians voted in favour of changes that would allow President Vladimir Putin to remain in the Kremlin until 2036.

Turkish stocks rose, while the lira edged lower after data showed the country’s trade deficit narrowing in June, indicating that economic activity was slowly recovering from the coronavirus.

For GRAPHIC on emerging market FX performance in 2020, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2020, see tmsnrt.rs/2OusNdX

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For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see (Reporting by Ambar Warrick in Bengaluru; Editing by Jan Harvey)

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