LONDON Aug 2 (Reuters) – Caution held emerging markets in
check on Thursday ahead of a European Central Bank meeting, with
equities dipping half a percent after four sessions of gains,
while the Romanian leu firmed up slightly as its central bank
kept rates on hold.
The Czech central bank is also expected to keep interest
rates steady on Thursday against a backdrop of slower domestic
growth, weakening currencies and market pressure.
But ECB president Mario Draghi risks triggering a market
backlash if Thursday’s policy decision doesn’t match words with
deeds after he told investors last week he was willing to do
“whatever it takes” to save the euro.
Emerging equities fell 0.6 percent, easing further
from the four-week highs hit earlier in the week. Markets were
also discouraged when the Federal Reserve held off offering more
stimulus to the U.S. economy on Wednesday.
“The Fed failed to deliver a stronger policy signal
yesterday evening, which has been a cause for disappointment.
Some weakness at today’s opening of the EMEA session is
therefore quite likely,” Societe Generale told clients.
“This has not been a good start to the big obstacle course
this week.”
Chinese stocks, which make up 18 percent of the index, fell
0.6 percent to hover near 41-month lows as property
shares were hit by talk of fresh government curbs on the sector.
In Romania, the central bank held rates at 5.25 percent, in
line with expectations, as it attempts to balance growth
concerns with the need to strengthen a currency that last month
fell to record lows. The leu could fall more as the National
Bank of Romania is running low on foreign currency reserves.
The leu rose 0.2 percent on Thursday as did the
Czech crown ahead of a rate decision in Prague.
The Czech central bank is likewise expected to hold rates
at 0.5 percent.
(Reporting by Alistair Smout; Editing by Hugh Lawson)
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