EMERGING MARKETS-EM stocks recover, Hungarian forint slips on fears of GDP downgrade

Emerging market stocks recovered some ground on Tuesday following the prior session's sharp sell-off, while the Hungarian forint held near five-month lows versus the euro ahead of a likely downgrade to the country's GDP forecast by the central bank. The forint fell 0.2% against the euro ahead of an interest rate decision at 1200 GMT.

Emerging market stocks recovered some ground on Tuesday following the prior session's sharp sell-off, while the Hungarian forint held near five-month lows versus the euro ahead of a likely downgrade to the country's GDP forecast by the central bank.

The forint fell 0.2% against the euro ahead of an interest rate decision at 1200 GMT. The Hungarian central bank is expected to stand pat as higher-than-expected inflation limited room for further meaningful stimulus for the sagging economy. The central bank will publish its new economic projections an hour later.

"The Hungarian economy saw the CEE region's biggest lockdown-induced hit in Q2, with this likely to result in significant downward revisions to the central bank's growth forecast," said Marek Drimal at Societe Generale in London. "This is in line with the developments in CEE, with domestic demand having recovered swiftly after the lockdowns ended amid continuing supply-side issues."

Central European currencies have been under pressure recently as the region reported some of the fastest-rising COVID-19 infection rates in Europe. The Polish zloty slid 0.1% versus the euro on Tuesday while the Czech crown weakened 0.2% against the common currency, both trading at four-month lows.

Turkey's lira hit a new record low against a firmer dollar as investors weighed whether the central bank would hike rates at its meeting on Thursday to stem the decline. While most economists in a Reuters poll did not expect the central bank to formally hike its policy rate, they predicted it would continue backdoor steps to tighten the money supply.

The South African rand retreated for a second day after hitting a six-month high last week. The Russian rouble bucked the trend, rising 0.4% against the dollar after hitting a four-year low against the euro on Monday as oil prices tumbled.

Sberbank, Russia's largest lender, said the labor market is seeing a gradual recovery from the impact of the COVID-19 pandemic because people are being hired at lower salaries. Developing world stock indexes recovered slightly after suffering sharp falls on Monday as fears of coronavirus-related business shutdowns in the UK cast a shadow on a fragile global economic recovery.

Leading gains were Russia's dollar-denominated and rouble-based indexes, adding about 0.8% each. Turkey's stocks rose 0.5%. 

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)