EMERGING MARKETS-EM assets set for weekly declines after Powell's hawkish remarks

Wall-Street stocks ended lower on Thursday and global equities followed suit on Friday. The dollar and the yields on benchmark U.S. 10-year Treasury bonds spiked on Thursday after a weaker-than-expected 30-year bond auction and hawkish remarks from the Fed. Fed officials including Powell said on Thursday they are still not sure interest rates are high enough to finish the battle with inflation. "Powell’s remarks probably represent the culmination of a pushback against the recent dovish repricing," Francesco Pesole, FX strategist at ING said in a note.

Emerging markets stocks and currencies fell on Friday, mirroring global sentiment after the U.S. central bank chief's hawkish comments fuelled fears of further rate hikes and a weak auction of 30-year Treasury bonds dampened risk appetite. The MSCI index tracking emerging markets equities fell nearly 1% by 1004 GMT, while a basket of regional currencies weakened 0.3% against a steady dollar.

Both equities and FX were on track for weekly losses, after a bright start to the opening week of November. Wall-Street stocks ended lower on Thursday and global equities followed suit on Friday.

The dollar and the yields on benchmark U.S. 10-year Treasury bonds spiked on Thursday after a weaker-than-expected 30-year bond auction and hawkish remarks from the Fed. Fed officials including Powell said on Thursday they are still not sure interest rates are high enough to finish the battle with inflation.

"Powell's remarks probably represent the culmination of a pushback against the recent dovish repricing," Francesco Pesole, FX strategist at ING said in a note. "The hawkish rhetoric pushed by Powell suggests that the Fed still prefers higher Treasury yields doing the tightening rather than hiking again, and that is exactly what markets are interpreting."

Most emerging market stocks and currencies in Asia were in the red. Heavyweight China's shares fell 0.5%, while its blue-chip index dropped 0.7%. The yuan slipped 0.1%

Hong Kong stocks fell 1.8%, leading equity declines. In Central and Eastern Europe, Hungary's headline inflation slowed to an annual 9.9% in October, entering single-digit territory for the first time since April 2022 and below analyst forecasts for a 10.4% increase.

Hungary's benchmark stock index gained 0.7%, while the forint jumped to its highest levels since late July and was last seen at 0.8% higher against the euro. Czech headline inflation accelerated to 8.5% year-on-year in October, above a Reuters poll forecast of 8.4%. PX Prague SE index declined 0.2% and the crown gained 0.3%.

A slew of data is due later in the day, with October inflation data coming in from both Brazil and Russia, while industrial output for September will be released by India and Mexico. Turkish President Tayyip Erdogan criticised the Constitutional Court for "many mistakes" and urged his ruling AK Party colleagues to support an unprecedented challenge to the court by an appeals court, stoking a potential legal crisis.

Overnight in Latin America, Banxico kept its benchmark interest rate unchanged as expected at 11.25%. For GRAPHIC on emerging market FX performance in 2023, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2023, see https://tmsnrt.rs/2OusNdX

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