LONDON, July 5 (Reuters) - Emerging stocks fell for a fourth straight session on Thursday as a deadline neared for Washington to impose tariffs on $34 billion of Chinese goods, with Beijing set to retaliate in kind.
MSCI's benchmark emerging equity index was down 0.3 percent, reflecting growing fears the tit-for-tat tariffs will hit exporters in other countries as the World Trade Organization warned the effects were already starting to show.
China has made clear that tariffs on U.S. goods will take effect immediately after the U.S. duties kick in.
"It's quite a bearish global market environment," said Koon Chow, an emerging markets strategist at UBP. "There are concerns about global growth given the increase in trade tensions ... manifesting in punishment of currencies or countries that are open and do a lot of trade with the U.S. and China."
Asian markets took much of the heat with Hong Kong shares down 0.7 percent at October lows, while Chinese mainland shares slid 0.9 percent and the yuan retreated a touch. The yuan rose sharply against the dollar earlier in the week after China's central bank moved to calm the market.
Taiwanese shares fell 1 percent and South Korea stocks slipped 0.4 percent to 14-month lows.
Philippines stocks shed 1.5 percent as inflation there quickened to its highest in more than five years, opening the door for a third rate hike this year.
Parts of emerging Europe opened stronger, however, with Turkish stocks up 0.8 percent and Russia shares up 0.5 percent.
With the dollar index retreating 0.3 percent, some of the emerging currencies that have sold off in recent days stabilised or rose.
BNP Paribas Asset Management said it was continuing to look for opportunities to add long EM FX exposure: "Our view on EM remains constructive. We believe that market participants have now discounted most of the bad news and that there are now more elements for positive rebound," it said in a note.
The Turkish lira stabilised after coming under sustained selling earlier in the week when consumer price inflation jumped to a 14-year high. This increased expectations the central bank will have to raise rates again.
Turkey's prime minister said bringing down inflation and interest rates was a top priority.
UBP's Chow put the chances of another Turkish rate hike at 50/50. "Now we are post-election, keeping the exchange rate stable is less important from a political standpoint and yields are already high enough to slow the economy down – adding another 100 basis points won't make much difference," he said.
In emerging Europe, Hungary's forint firmed 0.4 percent against the euro to a two-week high, rebounding from a record low hit in recent days.
Sentiment has improved on expectations that the central bank in Budapest, which moved away from its ultra-loose stance in its rhetoric last month, is working on plans to tackle inflation.
The zloty traded flat. Political tensions between Poland and the European Union have resurfaced after legislation came into force requiring a third of Supreme Court judges in Poland to retire.
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For RUSSIAN market report, see) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg
Morgan Stanley Emrg Mkt Indx 1052.65 -3.42 -0.32 -9.13
Czech Rep 1077.56 +1.54 +0.14 -0.06
Poland 2176.81 -5.70 -0.26 -11.56
Hungary 36567.95 -32.30 -0.09 -7.13
Romania 7817.64 -82.35 -1.04 +0.82
Greece 744.05 -0.36 -0.05 -7.27
Russia 1153.33 +5.80 +0.51 -0.10
South Africa 51568.68 +194.39 +0.38 -1.84
Turkey 98005.17 +775.10 +0.80 -15.02
China 2733.98 -25.15 -0.91 -17.33
India 35598.77 -46.63 -0.13 +4.53
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 25.99 26.02 +0.12 -1.78
Poland 4.38 4.38 +0.04 -4.64
Hungary 324.03 325.30 +0.39 -4.17
Romania 4.66 4.66 -0.00 +0.37
Serbia 117.91 117.89 -0.02 +0.42
Russia 63.26 63.27 +0.02 -8.86
Kazakhstan 343.46 343.16 -0.09 -3.10
Ukraine 26.43 26.43 +0.00 +6.49
South Africa 13.68 13.67 -0.03 -9.65
Kenya 100.75 100.65 -0.10 +2.33
Israel 3.64 3.65 +0.29 -4.39
Turkey 4.66 4.67 +0.23 -18.60
China 6.64 6.63 -0.11 -1.96
India 68.81 68.69 -0.18 -7.23
Brazil 3.91 3.91 +0.02 -15.35
Mexico 19.42 19.45 +0.14 +1.19
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 383 -1 .10 7 68.80 1
Reporting by Claire Milhench; editing by John Stonestreet