LONDON, July 9 (Reuters) – Emerging stocks dropped 1 percent
to 10-day lows on Monday, as weak Chinese inflation data
reversed recent gains fuelled by optimism over the euro zone,
while Egyptian stocks slid after the country’s new president
ordered parliament to reconvene.
Chinese stocks fell 2.4 percent to a six-month low
after data showing Chinese consumer and producer prices falling
more than expected in June, signalling falling demand for goods
from the world’s second-biggest economy.
The prospect of a slowdown in China and the euro zone debt
crisis have been two of the main factors eating into emerging
market performance in the past two years.
Euro zone finance chiefs will try to flesh out plans to
reinforce the single currency in talks in Brussels on Monday.
“It’s not super-surprising that Chinese inflation is coming
in a little bit lower than expected. It’s showing there’s some
underlying deceleration of demand in the economy,” said Luis
Costa, emerging markets strategist at Citi, adding:
“Bad economic news out of western Europe hits central Europe
right in the face.”
Benchmark emerging equities fell 1 percent from
Friday’s close and are down more than 2 percent from six-week
highs set last week.
Emerging European currencies were mostly weaker though the
Romanian leu held above record lows set on Friday
after Romania’s government suspended President Traian Basescu on
Friday, ruling he had overstepped his powers.
The cost of insuring Romania’s debt against default rose 22
basis points to 445 bps in the five-year credit default swap
market, according to Markit.