July 10, 2020 / 8:18 AM / a month ago

EMERGING MARKETS-Stocks set for worst day in nearly one-month on COVID-19 worries

* U.S. reports highest ever daily rise in COVID-19 cases

* China stocks halt rally, weigh on Asian markets

* MSCI EM stocks index still set for second weekly gain

* Polish zloty in focus ahead of Sunday's presidential election

By Shreyashi Sanyal

July 10 (Reuters) - Emerging markets stocks were set for their worst day in nearly one month on Friday due to concerns about rising COVID-19 cases but were expected to clock their second week of gains on hopes of a gradual, stimulus-induced pick up in global economic activity.

The mood remained largely off risk in Asia, with Chinese stocks halting a rally that kicked off on June 29 as state media discouraged retail investors from pushing the market higher and worries about China-U.S. friction.

The United States on Thursday imposed sanctions on the highest-ranking Chinese official yet over alleged human rights abuses against the Uighur Muslim minority.

"What looked to be a minor case of indigestion in Asia might turn into a full-blown heartburn attack," said Stephen Innes, chief global market strategist at AxiCorp.

The MSCI's index for emerging market stocks fell 1%, on worries of coronavirus as more than 60,500 new COVID-19 infections were reported across the United States on Thursday, setting a one-day record.

"Waking up to the snarly U.S. Covid-19 headline shock... one can't help but feel overly compelled to reduce risk," Innes added.

The index was, however, set to record its second weekly rise as investors continued to bet on more fiscal and monetary stimulus to steer the global economy out of the healthcare crisis.

Russia's rouble fell 0.3%, while South Africa's rand slipped 0.5%. The Turkish lira traded flat.

Data showed, Turkey's unemployment rate fell to 12.8% in the March-May period from 13.2% a month earlier, falling despite an economic slowdown driven by measures to counter the coronavirus outbreak.

The Polish zloty edged higher against the euro, remaining in focus for investors ahead of a presidential election on Sunday.

Analysts at Commerzbank said political environment will elevate risk with the election deferred from May still underway.

"In the 2019 general election, ruling PiS lost the senate. The loss of senate will likely make PiS eager to regain ground by maintaining high spending, which will deteriorate the longer-term fiscal outlook."

Other central and eastern European currencies including Hungary, Romania and the Czech Republic were higher against the euro.

For GRAPHIC on emerging market FX performance in 2020, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2020, see tmsnrt.rs/2OusNdX

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see (Reporting by Shreyashi Sanyal in Bengaluru; Editing by Angus MacSwan)

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