Emerging market stocks fell on Monday as weak Chinese export data stoked fears of deepening cracks in the world's second-biggest economy, while a soft dollar did little to help developing world currencies. MSCI's index for emerging market (EM) shares fell more than 1 per cent, with indexes in Hong Kong and Johannesburg leading declines.
Mainland Chinese shares dropped after a shock contraction in Chinese exports in December reinforced fears that U.S. tariffs on Chinese goods are putting a big strain on its already cooling economy, but the government's tax-cut plans to boost growth curbed further declines.
Softening demand in China has already contributed to a deteriorating global growth outlook, with slowing sales of goods from iPhones to automobiles, and investors worry a prolonged slowdown could only get worse for markets.
"This is re-alerting market participants that the global economy is facing, in our view, a temporary slowdown as we see the vacuum from some of the front-loading of global trade late last year," said Jakob Christensen, chief analyst and head of EM research at Danske Bank. Indian shares fell in line with EM counterparts but were cushioned by gains in Infosys Ltd after the IT major raised its full-year revenue forecast and announced a share buyback.
Russia's MOEX index slipped 0.7 per cent, with shares of aluminium giant Rusal slumping 2 per cent at the open after reports the United States may delay the lifting of sanctions on companies linked to oligarch Oleg Deripaska.
The Turkish lira led declines among EM currencies after U.S. President Donald Trump threatened Turkey with economic devastation if it attacks a U.S.-allied Kurdish militia in Syria, prompting sharp criticism from Ankara.
Relations between the two NATO allies have been strained over U.S. backing for the Kurdish YPG, which Turkey views as an extension of the outlawed Kurdistan Workers Party (PKK) that is waging a decade-long insurgency on Turkish soil.
The threat "is re-alerting the anxieties we saw last year in Turkey's relations (with the United States)... So, I think (it) is highlighting the geopolitical risk for the Turkish lira and we remain quite bearish on the currency," Danske Bank's Christensen said.
China's yuan which surged last week touched its highest in nearly six months on Monday morning but pared gains after the poor Chinese trade data. The Indian rupee hit its lowest in nearly one month after data showed annual wholesale price inflation eased to an eight-month low of 3.80 per cent in December, strengthening views among some economists the central bank could ease its monetary policy stance next month.
Oil exporter Russia's currency ticked 0.3 per cent lower as crude prices fell more than 1 per cent. In Eastern Europe, Romanian stocks fell more than 1 per cent as concerns returned over tax measures announced a month ago, including an unconventional bank asset tax linked to interbank interest rates.
(With inputs from agencies.)