January 4, 2018 / 10:09 AM / 6 months ago

EMERGING MARKETS-Solid U.S., China data lifts emerging stocks, FX

LONDON, Jan 4 (Reuters) - Fresh evidence that the world's top two economies were on a solid growth track pushed emerging stocks to fresh 6-1/2 year highs on Thursday, while higher oil prices underpinned crude exporters.

Global equities hit a new high following record closes on Wall Street on Wednesday,, helped by robust growth numbers and a rally in energy stocks.

Tensions in key oil producer Iran and ongoing OPEC-led output cuts have pushed oil prices to their highest in over 2-1/2 years.

U.S. factory activity increased by more than expected in December, boosted by a surge in new orders growth, while China's services sector activity expanded at the fastest pace in more than three years.

MSCI's benchmark emerging equities index rose 0.4 percent, with Chinese mainland shares up 0.5 percent to over one-month highs, Warsaw up 1.7 percent to a six-week high, Prague up 1 percent to a 6-1/2 year high and Russian shares up 0.7 percent.

Strong economic data out of Germany and the broader euro zone added to the benign backdrop for Eastern Europe.

"Everything seems to point to a positive start, the risk appetite is good, you have FX rallying, you have equity markets rallying – it is a typical start to the new year with people taking up risk again," said Paul Fage, a strategist at TD Securities.

In Turkey, Halkbank shares surged as much as 4.7 percent before giving up most of these gains, after a U.S. jury found a Halkbank executive guilty of helping Iran evade U.S. sanctions. Halkbank said the banker had the right to appeal against the verdict. Halkbank dollar-denominated bonds were little changed.

The almost four-week trial has strained relations between the U.S. and Turkey, which said the decision was "unjust and unfortunate".

The Turkish bank sector index and the broader market were both up around 0.5 percent, while the lira firmed 0.4 percent against the dollar.

"The market has taken pretty much no notice of it," Fage said. "The whole thing is really about what the consequences will be for the relationship between Turkey and the U.S., and it is hard to know at this precise moment in time."

He was sceptical it would really have a substantial long-term negative market impact.

The South African rand firmed 0.8 percent against the dollar, shrugging off data showing South Africa's private sector economic activity contracted for a fifth consecutive month in December, hitting a 20-month low.

Meanwhile Angola's central bank said it would abandon its currency peg against the U.S. dollar from this month, setting the stage for the kwanza to fall sharply to match its value on the streets.

NKC African Economics said the change may not address domestic product shortages in the short-term. "Hence, the net impact will be inflationary given that a certain proportion of imports are no longer subsidised at a stronger exchange rate," analyst Cobus de Hart said in a note.

In emerging Europe the Polish zloty was trading near a 2-1/2 year high against the euro, while the Hungarian forint was trading near 2-1/2 month highs.

For GRAPHIC on emerging market FX performance 2017, see tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2017, see tmsnrt.rs/2dZbdP5

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

on year

Morgan Stanley Emrg Mkt Indx 1189.31 +5.10 +0.43 +2.66

Czech Rep 1098.43 +11.68 +1.07 +1.88

Poland 2505.27 +42.02 +1.71 +1.79

Hungary 39721.21 +116.81 +0.29 +0.87

Romania 7910.25 -0.56 -0.01 +2.02

Greece 818.78 +1.44 +0.18 +2.05

Russia 1196.67 +13.61 +1.15 +3.66

South Africa 52492.50 -339.57 -0.64 -0.08

Turkey 16672.07 +619.91 +0.53 +1.16

China 3386.50 +17.40 +0.52 +2.40

India 33934.84 +141.46 +0.42 -0.36

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2018

Czech Rep 25.52 25.49 -0.09 +0.04

Poland 4.15 4.15 -0.12 +0.51

Hungary 308.66 308.53 -0.04 +0.61

Romania 4.63 4.62 -0.13 +1.11

Serbia 118.85 118.70 -0.13 -0.38

Russia 57.12 57.12 +0.01 +0.95

Kazakhstan 332.02 333.22 +0.36 +0.23

Ukraine 28.03 27.85 -0.67 +0.40

South Africa 12.27 12.36 +0.68 +0.69

Kenya 103.15 103.40 +0.24 -0.05

Israel 3.45 3.45 +0.02 +0.81

Turkey 3.76 3.78 +0.49 +0.72

China 6.50 6.50 +0.05 +0.13

India 63.41 63.50 +0.14 +0.66

Brazil 3.24 3.24 -0.00 +2.32

Mexico 19.27 19.35 +0.39 +1.95

Debt Index Strip Spd Chg %Rtn Index

Sov'gn Debt EMBIG 302 -2 .06 8 09.38 1

All data taken from Reuters at 09:34 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT.

Reporting by Claire Milhench, additional reporting by Karin Strohecker, Editing by William Maclean

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