EM assets on track for weekly gains

Lower commodity prices and frayed nerves across global markets weighed on emerging assets yesterday but stocks and currencies were set for weekly gains, although Turkey’s lira remained under pressure despite better than expected growth data.MSCI’s emerging markets benchmark fell around 1% on the day, but was on track to rise 1.7% over the week in its third week of gains.Central and Eastern European shares delivered some of the biggest gains over the week, with Russian dollar stocks gaining almost 4%. Major stock markets pulled back yesterday as investors sought refuge in safe-haven assets amid concerns over the UK’s June 23 referendum that could see Britain exit the European Union, and worries over the health of the US economy.Oil prices extended the previous day’s fall to drop 1.5%, while copper hovered close to the four-month low hit on Thursday.”It is a risk off day today...we had a strong move up earlier in the week, and there is a bit of profit taking as we go towards the weekend,” said Paul Fage, senior emerging markets strategist at TD Securities.”But overall we are reasonably positive...the degrees of sell-off that you are getting every now and then seem to be shallower as time goes on.” Currencies painted a similar picture.In Turkey, slightly stronger-than-expected data showing that the economy had expanded by 4.8% in the first quarter failed to cheer the lira, which weakened 0.9% on the day against the dollar and was on track for a weekly loss.”Consumption remained the key driver of growth, while investment contracted,” Capital Economics analysts said in a research note.”The strength of consumer spending makes it difficult to justify recent rate cuts by the central bank, but mounting political pressure means that more loosening is probably on the way.” Oil prices taking a tumble weighed on Russia’s rouble, which was weaker on the day against the dollar, but still in line to strengthen 1% over the week as investors awaited the outcome of a central bank decision later in the day.A Reuters poll showed analysts were marginally inclined to expect a 50 basis point cut, which would be the first policy easing in nearly a year.South Africa’s rand slipped more than 1 % on the day, though was poised to strengthen over the week.Across central and eastern Europe, currencies also weakened against the euro with Poland’s zloty leading the pack lower.Ratings agency S&P Global, which downgraded Poland in January, said on Thursday the actions of the incoming central bank chief will be crucial as to whether Warsaw avoids another downgrade.In Croatia, the kuna hit a three-month low overnight as tension within the ruling coalition still threatens to topple the government.