Emerging market stocks were heading for their biggest weekly fall of the year yesterday, though Russia, one of the biggest losers of the week, steadied along with oil prices.
Russian stocks rose 0.6% off Thursday’s 16-month lows, but are down 3% so far this week, their worst weekly performance since mid-April.
The rouble also firmed 0.2% against the dollar after dipping to one-month lows on Thursday, but was down over 1% this week.
The sell-off was triggered by US lawmakers moving to impose new sanctions on Russia and force President Donald Trump to get the approval of Congress before easing any existing sanctions.
Oil’s price fall to six-month lows compounded Russia’s woes.
But as oil edged higher yesterday, the rouble found a floor, ahead of a Russian central bank meeting which is expected to cut interest rates by 50 basis points.
“The reason we expect a 50 bps cut is inflation fell to their target in May, and so far signs from the first quarter are that domestic demand is still soft and they have room to cut,” said Kiran Kowshik, a strategist at UniCredit.
“But it’s possible they could do 25 bps given how oil is trading,” he said, adding that either outcome was fine for the rouble due to the pace of disinflation.
MSCI’s emerging markets stocks index was steady near three-week lows hit on Thursday with gains in some European markets such as Hungary and Poland offsetting earlier losses in Asia.
Chinese mainland shares fell 0.3%, ending the week down 1.6%, the first weekly fall since early May as weak producer inflation and investment data have reinforced concerns of a renewed slowdown in the world’s No 2 economy. The yuan was set for its worst week since early-March, after the central bank fixed its official guidance sharply lower.
Hong Kong stocks closed slightly up but have lost 1.6% for the week, their biggest fall in three months.
Kowshik said that as fiscal stimulus promised by US President Donald Trump had been delayed, there had been some selling in emerging assets that would have benefited from such extra spending.
He cited South Korea, where the won fell as much as 1.2% before the central bank was suspected of intervening.
The won ended at five-week lows. US Federal Reserve signals that it may begin reducing its holdings of bonds and other securities this year is also a negative for emerging markets
“The bad news for emerging markets is the Fed tapering announcement, which many people were not expecting this week,” Kowshik said.”It suggests there is a limit to how much US yields can fall.”
The Turkish lira weakened 0.2% against the dollar.
The central bank left its key interest rate on hold on Thursday, despite high inflation.
South Africa was closed for a public holiday but stocks ended the week down almost 3%, their worst performance since December.
Mining stocks sold off hard on Thursday when the government revamped the sector’s ownership rules. 
In central Europe, the Romanian leu reached a near five-year low against the euro after the ruling coalition said it would seek to topple Prime Minister Sorin Grindeanu next week.
But the Serbian dinar hovered near a 17-month high hit on Thursday after the president nominated Ana Brnabic as the country’s first woman prime minister. She is not affiliated with any party.

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