EMERGING MARKETS-Stocks slip as China growth fears weigh; FX muted on dollar lull

Stocks in emerging markets fell on Tuesday, weighed down by Chinese shares as rising domestic COVID-19 cases sparked fears of a further economic slowdown, while currencies were subdued as the dollar paused around a two-decade peak.

Stocks in emerging markets fell on Tuesday, weighed down by Chinese shares as rising domestic COVID-19 cases sparked fears of a further economic slowdown, while currencies were subdued as the dollar paused around a two-decade peak. About 41 Chinese cities were currently implementing lockdowns or some kind of COVID-19 curbs, affecting 22.8% of the country's gross domestic product, according to Nomura. The northern city of Tianjin has become the latest big city to halt businesses and announce fresh restrictions.

China stocks fell 0.5%, while heavyweight Asian tech shares tumbled amid global growth fears and deepening concerns about China's property sector. MSCI's benchmark of stocks slipped 0.3% after adding nearly 2% on Monday and were on track for a yearly loss of nearly 21%, their worst since the 2008 financial crisis.

Further dragging sentiment, Russia's Gazprom told customers in Europe it cannot guarantee gas supplies, according to a letter seen by Reuters. "A slowing Europe at the same time as the U.S. economy is slowing ends up being a very bad thing for EM - you've got an impact on trade and capital flows, and if China is unable to push stimulus enough to shore up global growth, EM is stuck between stress on the credit card and stress on the capital account," said Nafez Zouk, EM sovereign debt analyst at Aviva Investors.

"Earlier this year, we were predominantly worried about inflation, the Federal Reserve's rate hikes and food inflation due to the Ukraine war, but what's changed over the last six weeks is growth concerns have become dominant, which is reflected in regional asset prices." Following a recent selloff, currencies ticked higher as the dollar paused for breath amid reduced odds of a full percentage-point Fed hike this month, with South Africa's rand and Mexico's peso up around 0.6%.

Turkey's lira, meanwhile, slipped 0.5% to December lows. New data showed home sales rose 11.7% in June on the year to 150,509 houses, with sales to foreigners jumping 81.8% and Russians topping the list. India's rupee weakened as far as 80.05 per dollar, striking a record low for the seventh successive trading session, before it steadied to 79.89/90 per dollar, helped by central bank intervention in the currency market, according to dealers. For GRAPHIC on emerging market FX performance in 2022, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2022, see https://tmsnrt.rs/2OusNdX For TOP NEWS across emerging markets

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