Emerging markets stocks hit one-week low as rising yields and oil prices stoke inflation fears

In Asia, indexes in heavyweights South Korea `.KS11` and Taiwan fell 1.8% and 1.6%, respectively, while mainland Chinese equities `.SSEC` and `.CSI300` declined more than 0.8% each. The Indian 10-year benchmark government bond yield climbed past 7% to its highest level in over three months. The U.S. dollar index `=USD` firmed, further pressuring Asian currencies. The EM FX gauge `.MIEM00000CUS` dropped 0.2%. Meanwhile, China will further develop offshore yuan markets, expanding their liquidity as it promotes the currency's internationalisation, Lu Lei, a deputy central bank governor, said on Thursday. The yuan `CNY=CFXS` firmed. Investors also awaited U.S. consumer inflation figures later in the session, seen as key to the Federal Reserve's next policy move at its meeting next week. The European Central Bank raised interest rates on Thursday for the second time this year, aiming to quell energy-driven inflation while warning that price pressures could prove stubborn. Turkey's central bank kept its key interest rate at 37% on Thursday, as expected, holding steady for a fifth consecutive meeting in what is widely seen as its last pause before a monetary easing cycle begins later this year. Turkish stocks `.XU100` added 0.1%, while the lira `TRYTOM=D4` weakened 0.2%. Across emerging Europe, currencies were firmer against the euro. Hungary's central bank needs to maintain a sufficient buffer on real interest rates amid volatility in global markets, central bank Governor Mihaly Varga told an economics conference on Thursday. Local stocks `.BUX` gained 0.9%, while the forint `EURHUF=` inched up. Poland's central bank is in wait-and-see mode, possibly until the middle of next year, National Bank of Poland Governor Adam Glapinski said on Thursday, a day after the NBP held its main interest rate at 3.75%. Equities in Warsaw `.WIG` added 0.6% and the zloty `EURPLN=` firmed. Indexes tracking emerging market stocks and currencies slipped on Friday as elevated oil prices and rising global bond yields dampened appetite for riskier assets, while investors braced for U.S. inflation data later in the day. MSCI's index tracking emerging market stocks `.MSCIEF` fell 1.3% to a one-week low. Brent crude futures `LCOC1` eased, though still traded near four-month highs after a sharp rally this week. Higher energy costs are feeding market fears that worsening price pressures may complicate the interest rate outlook. Global bond yields have climbed to multi-year highs: the 10-year U.S. Treasury yield is approaching the much-watched 5% level `O/RMKTS/GLOB`. Higher yields on developed-market debt reduce the appeal of emerging markets. "Overall it's a cautious mood. The rise in bond yields is in the spotlight," said Paul Jackson, global market strategist EMEA at Invesco, adding that for some investors, U.S. Treasury yields at 5% is when they "start to worry."

Emerging markets stocks hit one-week low as rising yields and oil prices stoke inflation fears

Asia weakens as the dollar firms

Investors await U.S. inflation data

Turkey, central Europe and policy watch

Emerging market stocks and currencies fall as yields and oil pressure risk appetite

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