Oct 11 (Reuters) – Emerging market equities and currencies hit a two-week high on Wednesday as hopes of fresh stimulus from China and a dovish shift in tone from several Federal Reserve policymakers eclipsed geopolitical concerns in the Middle East.
MSCI’s index for emerging market equities .MSCIEF rose 1.2% by 0902 GMT, extending a 1% jump from the previous session.
Stocks in China .CSI300 and Hong Kong .HSI rose on a report that Beijing is preparing new stimulus to meet growth targets. The International Monetary Fund had on Tuesday cut its growth forecast for China amid a real estate crisis.
South Korea’s benchmark stock index .KS11climbed nearly 2%, posting its biggest gain in nine months as shares of chipmakers and battery manufacturers, including Samsung Electronics 005930.KS rallied on robust earnings reports.
The currencies index .MIEM00000CUS advanced 0.2%, with the dollar =USD rangebound after a number of top Fed officials suggested that a rise in U.S. Treasury yields could have reduced the need for further policy tightening.
Optimism around China and easing jitters around the Fed’s rate trajectory have lifted sentiment towards risk-sensitive assets and pressured U.S yields following a jolt on Monday from the conflict between Israel and Palestinian Islamist group Hamas.
Israel launched a diaspora bond campaign on Tuesday to raise money amid a war with Hamas, according to posts on social media sites linked with Israel Bonds.
“Investors are struggling to assess how that conflict may develop, because obviously the key question is whether it’s going to escalate or not,” said Piotr Matys, senior FX analyst at In Touch Capital Markets.
“We’re going to have key U.S. data and that will provide fresh clues on how long the Fed may have to maintain that tight monetary policy. And that data probably is going to be a short distraction from the main focus on geopolitics.”
Later in the day, investors will assess minutes from the Fed’s rate-setting meeting last month when it held interest rates steady, with Thursday’s data on consumer prices also on the watchlist.
The South African rand ZAR= rose 0.7% while the Turkish lira TRYTOM=D3 was flat at 27.273 to the dollar.
Central and Eastern European currencies also firmed against the euro with Hungary’s forint EURHUF= up 0.3% ahead of the release of minutes from the central bank’s last rate-setting meeting.
(Reporting by Amruta Khandekar; Editing by Varun H K)
