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Stocks jarred by emerging markets’ rout
September 07, 2018
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LONDON: World equities were in a jittery mood on Thursday as an emerging markets rout posed a major headache for investors, who are already on red alert over Washington’s trade war with Beijing, dealers said.

In Europe, Frankfurt and London were lower, after heady declines of more than two per cent over the previous two sessions, while Paris eked out a small gain.

Wall Street stocks were mostly lower early on Thursday, with technology shares lagging, amid lingering trade war uncertainty and mixed economic data.

About 10 minutes into trading, the Dow Jones Industrial Average was at 26,010.71, up 0.1 per cent.

The broad-based S&P 500 dipped 0.1 per cent to 2,885.42, while the tech-rich Nasdaq Composite Index shed 0.4 per cent to 7,962.93.

“There are tentative signs that this week’s risk sell off, particularly in emerging markets, could be taking a breather,” noted research director Kathleen Brooks at trading firm Capital Index.

But Asian bourses deepened their losses as concerns about contagion from emerging markets (EM) − centred on Argentina, Turkey and South Africa − frayed investor nerves, while sentiment was also dented by the possibility of further US tariffs on China.

Meanwhile, India’s rupee hit a new record low of 72 to the dollar.

“Animal spirits take hold very quick because investors outside of emerging markets often have EM exposure these days. What happens in the sphere can have an impact on investment elsewhere,” Brooks told AFP.

“Also, contagion works because problems in EM can make people fearful of risky assets elsewhere, and risk in general.” Worries persist that EM crises will infect the broader global economy and derail growth.

“Emerging markets turmoil reflects concern about the impact of trade wars on growth, tightening monetary policy and a turn lower in EM growth,” added Kit Juckes, macro strategist at French bank Societe Generale.

“Turkey, South Africa and Argentina are all minor players in global markets but they are all countries with sizeable current account deficits who are in danger of running into international funding problems.

Agencies

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