LONDON, Oct 16 (Reuters) - Emerging stocks sailed to a fresh 6-year high on Monday but currencies cooled off after their recent rally as investors re-assessed the outlook for growth and inflation in China.
MSCI's emerging market benchmark gained 0.4 percent to hit the highest level since August 2011, having now risen 11 out of the past 12 sessions. Much of the momentum came from Asian bourses, with MSCI's Asia ex-Japan adding 0.5 percent to scale a decade high.
Markets took some inspiration from China's central bank governor, saying the economy could grow 7 percent in the second half of this year, accelerating from the first six months and defying widespread expectations for a slowdown.
Meanwhile data from Beijing saw producer price inflation in world's second largest economy unexpectedly accelerate in September to a six-month high as a construction boom showed no signs of abating, while a government crackdown on air pollution triggered fears of winter shortages and frenzied jumps in commodity prices.
"Chinese inflation is part of the picture," said Per Hammarlund, chief emerging markets strategist at SEB.
"Also the fact that higher commodity prices are not feeding into consumer prices yet – that suggests the PBOC will not have to tighten monetary policy particularly fast either or slow down the economy too much."
Underpinned by China, commodity prices climbed, with copper charging through the $7,000 mark for the first time in three years, while steel-making inputs iron ore and coke raced higher.
Oil prices jumped as Iraqi forces entered the oil city of Kirkuk, taking territory from Kurdish fighters and raising concerns over exports from OPEC's second-largest producer.
Tensions between Baghdad and the Kurdistan Regional Government (KRG) have escalated since the Sept. 25 independence referendum, and are weighing on Iraq's dollar bonds which lost around 1 cent on Monday.
But higher commodity prices failed to cheer emerging market currencies, which had rallied last week on the dollar retreat.
"Since last week we have seen a big move in EM FX stronger – it has strengthened quite substantially – it's a complete repricing of the Fed risk," said SEB's Hammarlund.
South Africa's rand weakened 0.5 percent against the dollar, retreating from a three-week high hit on Friday when a court upheld corruption charges against President Jacob Zuma.
Mexico's peso slipped 0.5 percent, also under pressure from rising tensions over talks to determine the future of the North American Free Trade Agreement. The current round of talks - the fourth in a planned series of seven - looked set to be extended by two days as negotiators were running out of time to meet a year-end deadline, according to sources.
Turkey's lira weakened 0.3 percent. However, Russia's rouble took a breather after a four-day winning streak as firmer crude prices provided support.
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg
Morgan Stanley Emrg Mkt Indx 1130.78 +4.87 +0.43 +31.14
Czech Rep 1052.67 -0.41 -0.04 +14.22
Poland 2536.28 +8.12 +0.32 +30.20
Hungary 39038.97 +144.09 +0.37 +21.99
Romania 8031.02 -3.94 -0.05 +13.35
Greece 768.46 +7.11 +0.93 +19.39
Russia 1155.53 -1.11 -0.10 +0.28
South Africa 51856.77 +406.38 +0.79 +18.12
Turkey 06325.58 +99.89 +0.09 +36.07
China 3378.80 -11.72 -0.35 +8.87
India 32637.22 +204.53 +0.63 +22.57
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 25.78 25.79 +0.04 +4.75
Poland 4.24 4.25 +0.06 +3.79
Hungary 308.00 307.99 -0.00 +0.27
Romania 4.58 4.58 +0.04 -1.05
Serbia 119.15 119.25 +0.08 +3.52
Russia 57.22 57.17 -0.09 +7.06
Kazakhstan 333.29 334.41 +0.34 +0.11
Ukraine 26.51 26.51 +0.00 +1.85
South Africa 13.34 13.26 -0.61 +2.94
Kenya 103.15 103.20 +0.05 -0.76
Israel 3.50 3.50 +0.08 +10.10
Turkey 3.65 3.63 -0.33 -3.27
China 6.59 6.58 -0.17 +5.36
India 64.74 64.70 -0.07 +4.95
Brazil 3.14 3.14 -0.01 +3.44
Mexico 19.02 18.91 -0.60 +8.89
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 307 -1 .02 8 06.22 1
Reporting by Karin Strohecker, additional reporting and graphic by Claire Milhench; Editing by Keith Weir