Emerging market stocks rise, FX flat as Dollar stays firm ahead of key inflation test

Emerging market news: Emerging market stocks climbed on the last trading day of a holiday-shortened week, while currencies lagged against a firm dollar as investors awaited crucial inflation data from the United States, the world's largest economy.

The MSCI stocks index (MSCI Emerging Markets Index) rose by 0.4 per cent, approaching a quarterly gain of 1.6 per cent, albeit losing some momentum after a robust 7.4 per cent surge in the previous quarter.

Meanwhile, the currencies gauge slipped by 0.1 per cent, signaling a potential quarterly decline. The dollar index was set for a quarterly advance, firming by 0.2 per cent on the day. Federal Reserve Governor Christopher Waller's remarks, noting recent disappointing inflation data, affirmed the case to hold off on cutting a short-term interest rate target.

Investors are eagerly awaiting the release of the Fed's preferred inflation gauge, the core personal consumption expenditures (PCE) price index data, scheduled for Friday. Any unexpected negative surprises in the data could further blur the outlook for US rate cuts.

Monex Europe analysts noted, "Another quiet session for markets, with quarter-end flows and positioning ahead of a long weekend in Europe likely to dominate."

Heavily weighted Chinese stocks surged amid expectations that Beijing would implement more aggressive measures to stimulate the economy. Additionally, positive sentiment was fueled by an official's speech. The blue-chip CSI300, Hang Seng index, and the Shanghai SE Composite index gained between 0.5 per cent and 0.9 per cent.

Pakistan's benchmark stock index touched an all-time high, extending a rally following a staff-level agreement with the International Monetary Fund (IMF) earlier this month, which aims to unlock more financial aid for the country.

In the Gulf, stock markets rose, tracking higher oil prices after two days of losses. Traders are reassessing the latest data on US crude oil and gasoline inventories.

Russia's rouble strengthened to 92-per-dollar, supported by a month-end tax period.

On the currency front, South Africa's rand dropped by 0.7 per cent, while Sri Lanka's rupee rose by 0.2 per cent against the dollar. Major Central and East European currencies, including Hungary's forint, Poland's zloty, and the Czech crown, remained subdued against the euro.

Investor focus also remains on Turkey's local polls scheduled for Sunday, with President Tayyip Erdogan's AK Party aiming to reclaim some lost cities, including Istanbul and Ankara. The opposition hopes to secure a victory, with the future of Istanbul Mayor Ekrem Imamoglu tied to the outcome.

(With Reuters inputs.)