* ‘Phase 1’ U.S.-China trade deal struck late on Friday
* Rally in China stocks lifts EM shares
* Turkey market down after U.S. sanction threat
* Polish zloty up after ruling party wins elections
By Susan Mathew
Oct 14 (Reuters) - Emerging market stocks rose on Monday on signs of progress in the China-U.S. trade dispute, while the zloty hovered near 2-1/2 month highs after Poland’s ruling party won parliamentary elections.
Turkish markets fell, however, with the lira touching its lowest in nearly four months and stocks sliding 2.3%, after U.S. President Donald Trump said he was working on “powerful” sanctions against Turkey over its offensive into northeastern Syria.
But traders said they would believe it when they saw it, especially after U.S. threats earlier this year to sanction Turkey over buying Russian S-400 missile defence systems did not materialise.
The issue has pressured the lira over recent sessions, which has fallen 4.5% so far this month, on concerns about mooted U.S. sanctions following the start of the incursion.
MSCI’s index of emerging market shares rose 0.7% to a three-week high, following a strong rally in Asia led by mainland Chinese stocks .
Trump suspended a threatened tariff hike on Chinese goods that was due to take effect on Oct. 15 after striking a partial trade agreement, but analysts cautioned against too much optimism as none of the past tariff hikes were reversed nor was the threat of further hikes in December.
“While a positive development, we are not absolutely certain that this marks the start of a clear de-escalation of the trade dispute,” said Mark Haefele, Chief Investment Officer at UBS Global Wealth Management.
“The state of provisions on intellectual property, forced technology transfer, and Chinese state subsidies, the most difficult aspects of the negotiations, are still unclear.”
Both sides said much more work needed to be done before a full accord could be agreed, extending the trade war that has roiled for the last 15 months. Talks now move on to the next stage, building to next month’s meeting between leaders of the two countries at the Asia Pacific summit in Chile.
Existing tariffs will continue to bite the Chinese economy as was evidenced by dismal trade data from China for September, analysts say.
Russian shares were steady, while South African stocks slipped 0.4% after two days of gains. Currencies of both countries also slipped against a stronger dollar.
The Polish zloty firmed 0.2% against the euro after the ruling Law and Justice (PiS) party won a majority in Sunday’s parliamentary election, as expected, securing a second four-year term.
“I would say it’s a good result for the market. Doesn’t signal rising spending pledges,” said Piotr Poplawski, a senior economist at ING Poland.
“If anything investors might be guessing that the party may scale back some of its pledges especially those hitting private companies, but it is not anything spectacular or exceedingly new compared to what we expected.”
Polish stocks slipped around half a percent.
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For RUSSIAN market report, see (Reporting by Susan Mathew in Bengaluru, additional reporting by Tuvan Gumrukcu in Ankara; Editing by Emelia Sithole-Matarise)