Emerging markets, equities reel as dollar flexes muscles

Emerging markets, equities reel as dollar flexes muscles

Stock markets fell in Asia on Wednesday and the safe-haven dollar hovered near a two-week high as heightened worries over global trade conflicts and emerging market weakness curbed investors' appetite for riskier assets.

The pan-European FTSEurofirst 300 index lost 1.20 percent and MSCI's gauge of stocks across the globe shed 0.61 percent.

On Wall Street, the Dow Jones Industrial Average rose 22.51 points, or 0.09 percent, to 25,974.99, the S&P 500 lost 8.12 points, or 0.28 percent, to 2,888.6 and the Nasdaq Composite dropped 96.07 points, or 1.19 percent, to 7,995.17.

USA stocks had slipped on Tuesday as a drop in heavyweights Facebook and Nike added to worries over trade negotiations between the United States and other major economies.

Indonesia's benchmark stock index was last up 0.1 percent while the rupiah also gained a tad.

The United States and Canada resumed talks about revamping the North American Free Trade Agreement (NAFTA).

A crisis in the Turkish lira and the U.S.

"The linchpin will be China", said Sameer Samana, global equity and technical strategist for Wells Fargo Investment Institute, in St. Louis, adding that if China continues to grow, other emerging market countries could regain ground.

President Donald Trump's threats to ramp up a trade spat with China with an announcement of tariffs on as much as $200 billion in additional Chinese products as soon as Thursday also hasn't helped.

Emerging markets stocks and currencies faced their latest round of pressure with concerns brewing about inflation in Turkey and news South Africa had slipped into recession.

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Argentina's peso finished the day down over 2 percent on Tuesday.

The troubles in Turkey and Argentina, which has seen its peso collapse in recent weeks, are rattling markets due to fears their crises could spread. The cash-strapped nation is asking the International Monetary Fund for early disbursements from a $50 billion standby loan agreed up on in June, which had failed to clear concerns about the country's ability to pay off its debt.

"China trade war may be imminent, the timing is somewhat unclear and this justifies caution even given the (U.S. dollar) pullback", JPMorgan analysts said.

Measured against a basket of currencies, the dollar index retreated from two-week highs hit earlier this week to be last down 0.2 percent on the day. It was last up 0.2 percent against the dollar. But it has also drawn strength from upbeat U.S. indicators supporting the case for further interest rate hikes by the Federal Reserve - data showed U.S. manufacturing activity accelerating to more than a 14-year high in August.

There was also bad news on the economic outlook with surveys showing manufacturing activity took a hit from weak orders in August, a sign firms are feeling the pinch from an intensifying global trade war that could derail global growth.

South Korea's won lost 0.4 percent, while the South African rand sank one percent, Mexico's peso slipped 0.7 percent and the Canadian dollar was 0.3 percent off.

The yen strengthened about 0.3 per cent against the Aussie to 79.89 yen.

Oil prices meanwhile rose, supported by concerns that falling Iranian output will tighten markets once USA sanctions bite from November, but gains were limited by higher supply from OPEC and the United States.

The Brazilian real weakened more than 1 percent against the US dollar, while the Iranian rial was reported to have hit a record low against the USA currency.

Oil prices partly reversed a strong jump from the previous day, as the impact of a tropical storm on U.S. Gulf coast production was not as strong as initially expected.

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