EMERGING MARKETS-EM stocks fall sharply as Israel's attack on Iran dents sentiment

Reuters
13 Jun
EMERGING MARKETS-EM stocks fall sharply as Israel's attack on Iran dents sentiment

EM stocks down 0.9%, FX down 0.2%

Israel's dollar bonds fall after military strikes against Iran

Polish inflation at 4.0% y/y in May

Czech current account shows lower-than-expected CZK 14.4 bln surplus in April

By Nikhil Sharma

June 13 (Reuters) - Emerging markets stocks joined a global selloff on Friday as Israel's military strike on Iran sparked risk-off sentiment, pushing investors away to seek refuge in safe-haven assets.

MSCI's index for emerging market equities .MSCIEF shed more than 0.9% on Friday, mirroring downbeat sentiment in global markets. Meanwhile, futures tracking Wall Street's main indexes also fell sharply.

Israel launched wide-scale strikes against Iran, attacking nuclear facilities, ballistic missile factories and military commanders to prevent Tehran from building an atomic weapon.

The country has declared a state of emergency in anticipation of retaliation from Tehran, which says it has launched about 100 drones towards Israeli territory.

The military conflict added strain on Israeli bonds. Its issuance, which matures in 2054, fell more than 1.3 cents to the dollar.

Deteriorating Middle East tensions raised concerns about disrupted oil supplies, sending crude prices 5% higher.

Investors also sought refuge in safe-haven assets such as gold and the U.S. dollar =USD.

In emerging markets, a broader index for currencies .MIEM00000CUS fell 0.2% on Friday, even though it was eyeing robust weekly gains on the back of a broader downward trend in the greenback.

"In the FX market, a weaker U.S. dollar further supports stronger CEE currencies. On the other hand, yesterday we saw a slight correction in rates after a sharp rise in previous days - a move that also pared back recent FX gains. However, the picture for CEE currencies still looks more bullish," analysts at ING said in a note.

Polish currency zloty EURPLN= was down 0.25% against the euro. Fresh data showed the country's annual inflation slightly moderated to 4% in May, making room for rate cuts.

Additionally, a policymaker indicated a potential 100 basis points worth of interest rate cuts in 2026.

Despite the day's losses, the currency outperformed its peers this week by rising 0.3%.

Romania's leu EURRON= slipped 0.1% for the day, but was trading higher for the week as the currency attempts to recover from early May's record lows on heightened fiscal concerns.

Romania is running the European Union's highest deficit, with agencies rating Central Europe's second-largest economy on the lowest rung of investment grade with a negative outlook and calling for tax hikes and spending cuts.

Equities in Bucharest .BETI were down 2.4% for the week - the worst among its local peers. On Friday, they lost about 0.7%.

Meanwhile, focus was also on the Czech Republic's deepening political crisis after its main opposition party on Thursday called a no-confidence vote in the government.

The vote is scheduled to take place next week. The opposition has accused the ruling government of corruption over the acceptance of a $45 million bitcoin payment to the state by an ex-convict.

The Czech crown EURCZK= was down 0.2%, on track for weekly losses, with recent central bank data showing a lower-than-expected current account surplus in April.

The Czech central bank is very likely to leave interest rates unchanged in June but may debate one more cut at its August meeting, its board member said.

Prague's main stock index .PX dropped 0.7%, while down 1.7% for the week.

Hungary's forint EURHUF= lost 0.5% but was set to end the week higher, as the week's hotter-than-expected inflation data ruled out expectations for rate cuts this year.

Budapest stocks .BUX dropped for their third straight session, down 0.8%, taking weekly losses to about 2.3%.

For TOP NEWS across emerging markets nTOPEMRG

For CENTRAL EUROPE market report, see CEE/

For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB

(Reporting by Nikhil Sharma)

((Nikhil.Sharma@thomsonreuters.com;))

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