Stocks are at their lowest for three weeks, but no respite for emerging markets

LONDON (Reuters) – Trade talks between Washington and Beijing continued to put pressure on global markets on Wednesday, as troubled stocks and emerging currencies were weak, with the Indian rupee reaching a record high.

In Asia, MSCI's main non-Japan Asia-Pacific index was reduced to a 10th consecutive day in the red, its longest run of losses since September 2000 .MIAPJ0000PUS.

The stock exchanges in Shanghai, Hong Kong and Tokyo all closed lower, bringing emerging equities to a new minimum .MSCIEF at 15 months. The MSCI All-Country Equity Index edged up, seeking to extend two modest earnings sessions that posted six consecutive losses of .MIWD00000PUS.

"What the market needs is a sign of loosening commercial rhetoric, a little ramp-up," said Salman Ahmed, chief investment strategist at Lombard Odier. "That should be enough because the (economic) fundamentals are solid. But you need a trigger point and until now we have not seen it.

The escalation of tensions between the two largest economies in the world for several months shows no signs of slackening. President Donald Trump said on Tuesday that the United States is taking a firm stance with China. This has reinforced expectations for the forthcoming announcement of new levies on Chinese exports.

Earlier, China told the World Trade Organization (WTO) that it wanted to charge the United States $ 7 billion a year in retaliation for failing to comply with a decision in a previous trade dispute.

Equity markets also came under pressure from US two-year bond yields, which peaked around 10 years Tuesday, partly as a result of stronger data on the strength of the US economy.

This data pushed Wall Street to a strong close, driven by .XPX technology and energy stocks, and futures contracts for the Nasdaq benchmark, in strong technological growth, rose 0.2% on Wednesday. . The S & P500 and Dow Jones indices seemed set for flat openings, however .ESC1 YMc1.

In Europe, a pan-European index rose 0.2% from the lows of the past five months, although it gave up earlier solid gains.

Ahmed said another positive catalyst for the markets could be signals from the US Federal Reserve that could slow the pace of rate hikes. But given the flow of strong US data, which seems unlikely, this week's data showed that the optimism of US small businesses had reached its highest level.

"In 2015, when emerging markets faced a lot of difficulties, the Fed recognized the effect of international coaching. This time, it has not happened, "he added.

UNDER PRESSURE

Trading lines and higher US interest rates pushed the emerging currency index down nearly 7% this year .MIEM00000PUS. The yuan reached a two-and-a-half-week low against the CNH = the leading Asian countries retreated and maintained the Australian dollar AUD = D3 – strongly linked to Chinese trade – near its lowest since February 2016.

The dollar depreciated against a basket of .DXY currencies as Canada's hopes for concessions to resolve disputes over the recast North American Free Trade Agreement grew.

But emerging currencies remained under pressure.

While the worst-hit Turkish lira and Argentine peso TRY = D3 ARS = stabilized after record lows, the Indian rupee continues to inflate new troughs at the INR, bringing losses to more than 12% since beginning of the year.

"The rupee … is symptomatic of the general situation in the emerging markets, but it also includes particular problems: the budget deficit increases and the current account deficit increases due to rising commodity prices", said Cristian Maggio. Emerging Markets Strategy Officer at TD Securities.

Markets will also keep an eye on US bonds. Ten-year yields are just above record highs one month after steady numbers in the labor market and the Treasury kick-started a record sell-off of $ 150 billion.

The political risk in the meantime has returned to the radar of investors in Italy and Great Britain. Italian bond yields, which fell to six-week lows in recent days, rose after local media reported that 5-Star, one of the ruling coalition parties, was demanding 10 billion euros to put in universal income plans.

Sterling GBP = D3 also slipped from its five-week high against the dollar this week, as cautious optimism about a trade deal between Brexit and the European Union eased.

Oil prices rose $ 2 on Tuesday, with futures close to $ 80 per barrel as Hurricane Florence advanced and US sanctions began to weigh on LCOc1's Iranian exports.