Oct 18 (Reuters) – Equities and currencies across most emerging markets came under pressure on Wednesday as investors stayed clear of big bets as oil prices spiked following intensifying tensions in the Middle East.
Oil prices jumped after hundreds were killed in a blast at a Gaza hospital, sparking concerns that the conflict could widen into the broader region and involve big oil suppliers like Iran. O/R
Adding to jitters, Jordan cancelled a summit with U.S. President Joe Biden, Egyptian and Palestinian leaders.
Currencies of large crude importers like Turkey’s lira TRYTOM=D3 hit a record low of 28.05 against the dollar, while India’s rupee INR= was flat.
“The conflict in the Middle East does provide an upside risk to monetary policy in emerging markets,” said Shaun Murison, senior market analyst at IG Markets.
“Oil prices have renewed an upward trajectory which if extended or maintained will provide significant cost pressures to these economies.”
MSCI’s gauge of emerging market equities .MSCIEF fell 0.5%, while the currencies index .MIEM00000CUS was flat by 0900 GMT.
In some relief, a set of China data suggested a recent flurry of policy measures was helping to bolster a tentative recovery in the world’s second-largest economy.
The spot yuan CNY=CFXSstrengthened after data signalled gross domestic product (GDP) grew in quarter three, while September industrial production and retail sales rose and beat expectations.
However, caution loomed as Country Garden’s 2007.HK $15 million coupon payment deadline expired without word of payment and Hong Kong’s property sector .HSMPI closed 0.7% lower.
Riskier emerging markets currencies have seen little action recently as investors stayed wary amid a spiralling Israel-Hamas conflict, while keeping an eye on the U.S. monetary policy outlook and signs of a China recovery.
Israel’s shekel ILS= shed 0.1% and government bonds ticked lower after ratings agency Fitch placed its sovereign debt rating on watch negative and warned of negative rating action in case of major conflict escalation.
Meanwhile, Saudi Arabia’s sovereign wealth fund started taking orders for its debut dollar-denominated, dual-tranche Islamic bond.
Elsewhere, South Africa’s rand ZAR= added 0.3% after data showed September consumer inflation rose to 5.4% year-on-year from 4.8% in August.
Murison said the figures were unlikely to change the path of monetary policy in South Africa and expectations are that the central bank will maintain lending rates at current levels until the end of the year.
(Reporting by Johann M Cherian in Bengaluru; editing by Robert Birsel)
