May 9, 2019 / 9:05 AM / a year ago

EMERGING MARKETS-Stocks dive as threat of renewed trade war grows

May 9 (Reuters) - Emerging-market stocks slumped to two-month lows on Thursday as hopes dwindled for a trade deal between the United States and China. Currencies in the developing world also slid.

MSCI's index for emerging-market stocks fell nearly 2 percent after U.S. President Donald Trump said China "broke the deal" it had reached in trade talks with the U.S.

Trump's threat to raise tariffs on $200 billion worth of Chinese goods goes into effect on Friday if the two countries do not strike a trade deal or reach an agreement to delay the tariffs.

"While Trump may expect the added pressure will force China to compromise, he is prepared to escalate if China walks away," analysts from Eurasia Group said in a note. "Beijing is also unlikely to deliver the kind of last-minute concessions that the U.S. side is looking for."

Mainland Chinese and Hong Kong stocks extended declines. South Korean stocks tumbled more than 3 percent.

Indices in Istanbul, Mumbai and Johannesburg dropped 0.3 to 1.6 percent. Stock markets in Moscow were shut for a public holiday.

Currencies also fell, with the trade-sensitive South Korean won among the biggest losers.

South Africa's rand traded slightly lower a day after the country's elections. Votes were still being counted; results are due to be announced by May 11.

"The rand's outperformance against a basket of EM currencies could be reinforced if the consensus expectation for the ruling party plays out," said RMB analyst Nema Ramkhelawan-Bhana in a note.

Turkey's lira slid for a fifth straight session. A decision to re-run Istanbul's mayoral election has unnerved investors and cast doubt on the Turkish government's economic policies.

In emerging Europe, the forint weakened against the euro after Hungary reported headline inflation reached a seven-year high at 3.9 percent in April.

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see (Reporting by Agamoni Ghosh in Bengaluru; additional reporting by Olivia Kumwenda-Mtambo; editing by Larry King)

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