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Stocks and currencies mixed after recent gains

Currencies of Turkey, Russia, South Africa weaken.
Image: Michael Nagle, Bloomberg

Emerging market shares and currencies were mixed on Thursday with investors remaining cautious after two days of strong gains spurred by the announcement of massive monetary and fiscal coronavirus stimulus packages worldwide.

MSCI’s emerging market share index rose 0.6% as gains of between 2.6% and 10.3% in Indonesia, India and Philippines outweighed losses of up to 1% in China South Korea and Russia.

Turkish stocks inched 0.4% higher while those in South Africa climbed 1.7%.

The emerging markets stocks index rallied 11% during the previous two sessions, though losses of almost 25% this year to date are the biggest since the 2008 global financial crisis.

As more emerging economies go into complete lockdown to curb the spread of coronavirus, economic activity is slowly being brought to a standstill, making a deep recession more likely.

With the U.S. dollar remaining weak, most Asian currencies capitalised, with those of India, Indonesia and Malaysia up more than 1% while the Chinese yuan rose 0.4%.

But the Turkish lira, South African rand and Russia’s rouble all weakened more than 1%. The broader developing world currency index rose 0.2%, looking to extend gains to a third session.

Weekly U.S. initial jobless claims figures due later in the day are being keenly watched by investors to gauge the economic impact of the coronavirus outbreak.

The forecasts in a Reuters poll range from 250,000 claims to 4 million, with a median of 1 million, as companies lay off employees to cope with the economic stress of the pandemic. There were 281,000 claims the previous week.

“This will be the first insight into just how ugly the scale of job losses in the U.S. is likely to be,” said Michael Every, global strategist at Rabobank. “This week is seen at 1,500K, which, if true, would point to a labour market collapse eclipsing anything experienced in 2008-09.”

In South Africa, a 21-day lockdown starting at midnight on Thursday is expected to pile pressure on an economy already in recession.

Investors are also waiting with bated breath for a review of South Africa’s credit rating due on Friday from Moody’s, the only major agency which still rates the country as investment grade. Some analysts say Moody’s might postpone any downgrade in the light of the current market rout.

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