Mixed Signals: Emerging Markets React to Chinese Economic Data

Emerging market stock indexes showed mixed reactions as Chinese economic data raised doubts about recovery, despite a slight improvement in retail sales. The Philippine peso stabilized following a central bank rate cut. Meanwhile, investors eye key U.S. economic figures for further direction.

Emerging market stock indexes displayed mixed responses on Thursday after economic data from China cast significant doubt on a recovery in the world's second-largest economy. June factory output data slowed for a third consecutive month, missing analysts' forecasts, and July new home prices fell at the fastest rate in nine years. However, retail sales for July exceeded expectations, injecting some optimism.

Lynn Song, chief economist for greater China at ING, noted that while retail sales slightly beat expectations, there was little to celebrate, raising hopes for more government stimulus. This expectation helped lift Chinese stocks by 0.9%. Yet, Song cautioned that it's uncertain if policymakers have found suitable policies to implement.

In the Philippines, the peso reversed earlier losses and stabilized after the central bank cut interest rates by 25 basis points to 6.25%, coupled with a sign of easing inflation. This balanced out a mix of expectations hovering between a rate cut and no change.

Elsewhere, emerging market investors are closely watching key U.S. economic figures for signals on global growth. U.S. retail sales data are anticipated, following in-line inflation data that kept bets on a September start to Federal Reserve rate cuts firm.

Equity indexes were varied, with Turkey's Bist 100 falling 0.2%, South African stocks rising 0.7%, and the PX Prague Index ascending 0.2%. Despite ongoing geopolitical tensions, Russia's rouble continued its recovery, climbing 1% against the dollar.

Meanwhile, the euro hovered around a seven-month high against the Czech crown, while South Africa's rand hit a one-month high. Conversely, the Turkish lira remained around a record low. MSCI's index of emerging market stocks edged down 0.1%, while an index of broader currencies remained flat.

In Asia, Thai markets weakened with the baht down 0.2% and stocks dipping 0.4% following the dismissal of Prime Minister Srettha Thavisin, raising political concerns. Additionally, a group representing foreign holders of Ethiopia's $1 billion international bond expressed disappointment over government comments on a potential 20% principal haircut.

(With inputs from agencies.)