EMERGING MARKETS-EMEA stocks, FX muted as rising virus cases cloud economic outlook

MSCI's index of developing world stocks rose about 0.3%, supported chiefly by Asian equities after data showed Chinese factory activity expanded at a faster-than-expected pace in June. The index marked its best quarterly gain since 2009 in the second quarter, as improving economic indicators and the lifting of some coronavirus-related curbs boosted risk appetite.

Emerging markets in Europe, Middle East and Africa were subdued on Wednesday as investors weighed some improvement in economic data against a sustained increase in U.S. coronavirus cases. MSCI's index of developing world stocks rose about 0.3%, supported chiefly by Asian equities after data showed Chinese factory activity expanded at a faster-than-expected pace in June.

The index marked its best quarterly gain since 2009 in the second quarter, as improving economic indicators and the lifting of some coronavirus-related curbs boosted risk appetite. Turkish stocks, while flat for the day, outpaced their EMEA peers in the second quarter with a 30% rise, as a dearth of confidence in the lira and sovereign debt saw investors pivoting to equities.

Still, regional risk assets saw a rocky start to the new quarter following a spike in U.S. coronavirus infections, which could result in renewed lockdown measures in the world's largest economy. "Stock markets have priced in most of the optimism surrounding the U.S. economy's reopening and are in need of fresh catalysts to push higher once more," Han Tan, market analyst at FXTM wrote in a note.

"Scepticism has begun creeping in and investors are now second-guessing the amount of upside that remains in stocks over the near-term. The rise in COVID-19 cases in some U.S. states warrants a cautious outlook as they threaten to throw the economy off its course towards the post-pandemic era." South Africa's rand rose about 0.4% against the dollar, after weakening for three consecutive sessions. Data on Tuesday showed the country's recession deepened in the first quarter of 2020, even before the impact of the coronavirus pandemic.

Stocks in the country were muted for the day. Central European currencies such as the Hungarian forint and the Polish zloty inched higher against the euro.