March 9, 2017 / 10:51 AM / 5 months ago

EMERGING MARKETS-Rising US yields, falling oil price hurt emerging markets

5 Min Read

LONDON, March 9 (Reuters) - A fresh spike in U.S. Treasury yields and oil prices' plunge to three-month lows sent emerging stocks down more than one percent on Thursday, while the rand and the lira weakened against the dollar.

U.S. 10-year yields were at their highest level since December and the dollar rose after robust U.S. private sector jobs data suggested the Federal Reserve might tighten policy faster than markets have currently priced in.

"If the U.S. (economy) continues to surprise on the upside like this, the market is afraid it will have to revise its rate hike expectations for the year from three (hikes) to four," said Per Hammarlund, chief emerging markets strategist at SEB.

MSCI's emerging stocks index touched one-month lows, with bourses in Hong Kong, Taiwan, China and Poland losing as much as 1.2 percent.

Average yield spreads on emerging sovereign bonds over U.S. Treasuries widened to 305 bps, a near one-week high.

Russian dollar-denominated stocks slumped almost 3 percent to three-month lows, hurt by a 5 percent fall in oil prices on Wednesday when Russian markets were closed. The rouble-denominated index fell 1.4 percent, dipping below 2,000 points for the first time in 2017.

The yuan slipped after data showed producer inflation surging to a near nine-year high in February, whilst consumer prices cooled.

The South African rand weakened around 1 percent to the dollar and the Turkish lira slipped 0.5 percent, with both currencies near one-month lows.

Turkey, one of the emerging economies most exposed to a U.S. rate hike, is also embroiled in a row with Germany over Turkey's imprisonment of a Turkish-German journalist.

The Czech crown's euro exchange rate implied in the six-month forwards market touched two-month lows at 26.88 after Czech inflation rose to 2.5 percent year-on-year, the highest since November 2012.

Some investors reckon huge recent capital inflows have overdone expectations of massive crown appreciation once the exchange rate cap is scrapped.

"Taken together with the large rise in capital inflows related to speculation on the koruna, the chances of the (central bank) removing the exchange rate ceiling earlier in Q2 are rising," Liam Carson, emerging Europe economist at Capital Economics, said in a note.

For a 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 924.40 -10.50 -1.12 +7.21

Czech Rep 974.02 +1.78 +0.18 +5.69

Poland 2198.11 -15.13 -0.68 +12.84

Hungary 32454.87 -92.50 -0.28 +1.41

Romania 7870.03 -29.38 -0.37 +11.08

Greece 651.31 +2.00 +0.31 +1.19

Russia 1066.53 -30.91 -2.82 -7.45

South Africa 43981.06 -345.29 -0.78 +0.18

Turkey 89032.85 -452.05 -0.51 +13.94

China 3216.58 -24.08 -0.74 +3.64

India 28941.85 +39.91 +0.14 +8.70

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2017

Czech Rep 27.02 27.02 -0.01 -0.04

Poland 4.31 4.31 -0.17 +2.08

Hungary 310.28 310.72 +0.14 -0.47

Romania 4.54 4.53 -0.10 -0.10

Serbia 123.70 123.72 +0.02 -0.28

Russia 58.92 58.87 -0.08 +3.97

Kazakhstan 316.59 315.17 -0.45 +5.39

Ukraine 26.86 26.95 +0.34 +0.52

South Africa 13.25 13.13 -0.89 +3.65

Kenya 102.45 102.50 +0.05 -0.08

Israel 3.69 3.69 -0.15 +4.23

Turkey 3.76 3.75 -0.47 -6.29

China 6.91 6.91 +0.04 +0.50

India 66.79 66.76 -0.05 +1.73

Brazil 3.16 3.16 +0.04 +2.92

Mexico 19.75 19.67 -0.42 +4.89

Debt Index Strip Spd Chg %Rtn Index

Sov'gn Debt EMBIG 327 1 .14 7 59.07 1

Editing by Susan Fenton

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