London - Emerging stocks chalked up their biggest daily gains in eight weeks and currencies strengthened on Monday, lifted by a batch of recent disappointing US data that put a dampener on expectations for a Federal Reserve interest rate hike.
MSCI's emerging market index jumped 1.3 percent, helped by Asian bourses , where stocks in Hong Kong hit a one-year high. Indexes in Russia and emerging Europe also notched up solid gains.
The rally followed lacklustre U.S. numbers, with non-farm payrolls on Friday showing employment growth slowed more than expected in August while Thursday data saw factory activity contracting for the first time in six months.
“It is looking very difficult for the Fed to hike now with the [national factory activity] ISM number, which was below 50, and the non-farm payrolls really shook off the expectations,” said Jakob Christensen, head of EM research at Danske Capital.
“With the Fed out of the way now there is a decent prospect for emerging markets for the next couple of months.” Currencies also rallied against a faltering dollar.
Russia's rouble strengthened nearly 1 percent against the greenback, with additional support from oil prices roaring 4 percent higher amid speculation that major producers, including Saudi Arabia and Russia, could cooperate to strengthen prices.
South Africa's rand jumped by 1 percent in early trading only to give away half the gains after data showed private sector activity inching lower in August, with overall business conditions remaining subdued.
In Turkey, the lira gained 0.2 percent despite inflation data showing consumer prices had fallen by more than expected, increasing the central bank's leeway to continue the interest rate-cutting cycle at this month's meeting.
“The sharper-than-expected fall in Turkish inflation in August, to 8.0 percent year-on-year, is likely to be used as justification by the central bank for further modest interest rate cuts,” Capital Economics's William Jackson wrote in a note to clients, also pointing to core inflation still being far above the central bank's target range. Across central and eastern Europe, currencies also gained against the euro, with Poland's zloty and Hungary's forint both strengthening 0.3 percent.
In Croatia, the central bank called an auction to buy euros from commercial banks to ease appreciation pressures on the kuna, with the currency marginally weakening for a third straight session.
REUTERS