EMERGING MARKETS-Stocks, FX drop on US policy uncertainty and Chinese outflows

Emerging market stocks and currencies indexes fell on Wednesday, as investors continued their hunt for clues on the outlook for U.S. monetary policy easing, with Chinese stocks dropping to around one-month lows on strong foreign capital outflows. Both the MSCI index for EM stocks and the currencies gauge shed 0.3% as of 0930 GMT.

Emerging market stocks and currencies indexes fell on Wednesday, as investors continued their hunt for clues on the outlook for U.S. monetary policy easing, with Chinese stocks dropping to around one-month lows on strong foreign capital outflows.

Both the MSCI index for EM stocks and the currencies gauge shed 0.3% as of 0930 GMT. The dollar was largely firm on more strong U.S. economic data, adding to uncertainties about rate cuts, while the global focus is on Friday's U.S. core inflation figures.

"Resilient global growth especially, in the U.S. and loosening financial conditions have marginally improved global emerging markets' macroeconomic conditions since the end of 2023," said Chief Emerging Markets Economist Elijah Oliveros-Rosen at S&P Global Ratings. "Despite improving conditions, EMs will still face significant obstacles this year that will keep economic paths highly vulnerable. These include the lagged effects of high interest rates and a drag from an eventual slowdown in U.S. growth, which we expect will be more noticeable in the second half of 2024."

China's blue-chip CSI300 shed 1.2% and the Shanghai Composite index fell 1.4%. Foreign investors sold a net 7.2 billion yuan ($996.00 million) of shares via Stock Connect, logging the biggest daily outflow since mid January. The yuan also weakened on the dollar's strength, despite strong fixing to support the currency and improving economic data on industrial firms posting higher profits.

The yuan's slide has prompted speculation that authorities are deliberately but slowly engineering a light depreciation of the currency. Stock markets in the Gulf also dropped, tracking a slide in oil prices. Egypt's EGX 30 index shed nearly 0.9%.

Later in the day, South Africa will disclose its monetary policy decision, widely expected to keep its repo rate steady at 8.25%. Both stocks and the rand were largely unchanged ahead of the decision. Hungary's forint held firm among regional peers, rising 0.2% against the euro. Its central bank cut its base rate by 75 basis points on Tuesday, adding it will slow the pace of cuts from second quarter.

Elsewhere, the International Monetary Fund reached a staff-level agreement with Serbia on the third review of the country's two-year stand-by arrangement, which would make 400 mln euros available to Belgrade if approved by the Executive Board. HIGHLIGHTS:

** China to promote currency swaps, strengthen monetary cooperation ** ANALYSIS- Lucrative foreign exchange trade sustained by low volatility

** India c.bank keen to further build up record high FX reserves- sources

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