Data showed that growth in China’s manufacturing sector in February cooled to the weakest in more than one-and-a-half years, raising concerns that a slowdown in the world’s second biggest economy this year could be sharper than expected as regulators tighten the screws on financial risks.
Adding to the woes was new Fed chair Jerome Powell, who gave an upbeat view of the US economy and said recent data had strengthened his confidence on inflation. Following his remarks, markets started pricing in a one-in-three chance of a fourth US rate hike this year, potentially ramping up pressure on global borrowing rates.
MSCI’s emerging market benchmark fell more than 1percent and is on track for a more than 4percent fall on the month, its steepest such tumble since November 2016. Chinese stocks suffered some of the steepest falls, with the mainland blue-chip index down 1 percent while Hong Kong’s bourse fell 1.4percent.
“Global reflation is emerging as the core theme for 2018, particularly as we see a continued synchronised global recovery,” said Andrew Swan, head of Asian and Emerging Markets Equities at BlackRock in a note to clients.
“The pace of the US Federal Reserve rate hikes and scope for renewed dollar strength has caused some volatility across markets recently.”
Emerging currencies were mixed as the dollar strengthened for a second straight session.
The rand looked on track for a fourth consecutive month of gains, set to end February 1.5percent up against the dollar after Cyril Ramaphosa took over as president of Africa’s most industrialised nation.
However, S&P Global Ratings slashing the credit rating of state-run power utility Eskom deeper into junk, citing liquidity concerns and insufficient government support that could trigger a default, showing the country was still facing big challenges. Dollar-denominated Eskom bonds fell across the curve.
Russia’s rouble struggled to make gains on the day thanks to lower oil prices but was on track for its second month of gains