Nov 22 (Reuters) – Emerging markets stocks and currencies took a breather on Wednesday after a recent rally, while investors parsed South Africa’s inflation report and Israeli stocks and bonds gained on hopes of a temporary lull in the war with Hamas.
MSCI’s basket of developing markets currencies .MIEM00000CUS weakened 0.4%, while the index tracking equities .MSCIEF dipped 0.5% by 0926 GMT.
EM currencies had six straight days of gains and had hit an over one-and-a-half-year high on Tuesday on hopes that U.S. rates had peaked.
Also spurring some caution were minutes from the U.S. Federal Reserve’s last policy meet where policymakers said they would proceed “carefully” and only raise interest rates if progress in controlling inflation faltered.
South Africa’s rand ZAR= slipped 0.5% and stocks .JTOPI gained 1.1% after data showed headline consumer inflation, rose to 5.9% on an annual basis in October from September.
But the reading was still marginally below the higher end of the domestic central bank’s target range of 3% to 6%, leaving investors jittery ahead of an interest rate decision on Thursday where economists largely expect rates to be on hold.
“Food and transport (fuel) have once again lead local CPI inflation higher… (and) might create some angst for tomorrow’s interest rate decision by the SARB (South African Reserve Bank),” Shaun Murison, senior market analyst at IG markets said.
“There is however still a slight chance that the SARB will raise by another 25 basis points although this is not our base case.”
Meanwhile, the blue-chip Tel Aviv 35 index .TA35 rose 0.7% and government bond prices rose as much as 0.4% after Israel’s government and Hamas agreed to a four-day pause to over of a month of fighting that had the world on edge.
The local shekel ILS= however, dipped 0.4%.
“A ceasefire is a step forward but it is temporary and does not suggest that an end to the conflict is imminent,” said Hasnain Malik, head of equity research at Tellimer.
India’s rupee INR=IN strengthened nearly 0.1% and was last trading at 83.32 as the currency got a boost by IPO-related inflows.
Sri Lanka’s benchmark index .CSE edged up 0.4% and the country’s dollar bonds gained after the country’s treasury secretary said it expects the International Monetary Fund’s executive board to approve the first review of its $2.9 billion bailout by Dec. 6.
The local central bank is expected to hold interest rates steady on Friday, as per a poll.
China’s blue-chips index .CSI300 closed 1.0% down and the Hang Seng index .HSI ended flat, though Reuters reported that Chinese government advisers will recommend economic growth targets for 2024 ranging from 4.5% to 5.5% to an annual policymakers’ meeting next month.
(Reporting by Johann M Cherian in Bengaluru; Editing by Shailesh Kuber)
