March 21 (Reuters) - Emerging market stocks hit their highest in almost seven months on Thursday after the U.S. Federal Reserve brought an abrupt halt to its cycle of interest rate rises, although concerns over U.S.-China trade talks and slowing global growth limited gains.
At the end of a two-day policy meeting on Wednesday, the Fed abandoned projections for further rate hikes this year amid signs of an economic slowdown, and said it would halt the steady decline of its balance sheet in September.
That signal of an easier approach to monetary conditions pumped up investors’ appetite for riskier investments, including many emerging markets, at the expense of favoured safe haven bets like the dollar and U.S. Treasuries.
MSCI’s index of emerging market stocks rose 0.3 percent with most Asian indices gaining. Shanghai shares rose 0.3 percent.
Continuing concerns over trade tensions and the pace of growth globally, however, showed up in a flat performance for China’s blue-chip index, and almost 1 percent fall in Hong Kong.
U.S. President Donald Trump on Wednesday warned that Washington may leave tariffs on Chinese goods for a “substantial period” to ensure Beijing’s compliance with any trade deal.
“This could marginally dial back markets’ optimism of a U.S.-China trade deal soon,” said Christopher Wong, a senior foreign exchange strategist at Maybank in Singapore.
“Nonetheless it remains too soon to judge if trade talks are at risk of being derailed... as hopes of (the) U.S. and China finding common ground remain,” he added.
Trade talks between high-level officials from Washington and Beijing are set to resume next week, the first face-to-face meeting since Trump delayed a March 1 deadline on Chinese imports.
Shares of chip giants led gains on South Korea’s KOSPI index after U.S. chipmaker Micron Technology Inc forecast recovery in a memory market saddled with oversupply as device demand sags.
Russia’s MOEX index was marginally higher, led by gains in financials, while stock markets in India and South Africa were shut for public holidays.
Most currencies in the developing world were boosted by the Fed’s accommodative stance, but the Turkish lira fell 0.4 percent after a Reuters report stated that the United States could soon freeze preparations for delivering F-35 fighter jets to Turkey.
This would be the strongest signal yet that Ankara cannot have both the advanced aircraft and Russia’s S-400 air defence system and follows a heightening of tensions with Washington last year that spurred a sell-off in the lira.
Turkey took another step to boost consumption and the lira in the face of recession by extending the deadline for tax cuts on cars and other goods, and raising the withholding tax on some foreign currency deposits.
In emerging Europe, Hungary’s forint fell 0.3 percent against the euro after the European Parliament’s main centre-right grouping voted on Wednesday to suspend Prime Minister Viktor Orban’s ruling Fidesz Party until further notice amid concerns it violated EU principles on the rule of law.
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