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Abu Dhabi, UAETuesday 18 September 2018

Emerging market stocks rise as Czech and Polish GDP jumps

Easing tensions between US and North Korea lifts markets

The 4th International Organ Grinders Festival in Prague, Czech Republic. The country's GDP grew faster than expected in the second quarter. Martin Divisek / EPA
The 4th International Organ Grinders Festival in Prague, Czech Republic. The country's GDP grew faster than expected in the second quarter. Martin Divisek / EPA

The Czech crown and Polish zloty jumped on Wednesday after strong economic growth data smashed forecasts, while emerging market stocks rose to a one-week high as tensions between North Korea and the United States eased.

Czech growth rose to 4.5 percent year-on-year in the second quarter, well above the 2.9 percent forecast. The Czech crown leapt 0.4 percent against the euro to near two-week highs.

Central Europe's biggest market, Poland, delivered 3.9 percent growth, beating forecasts and lifting the zloty 0.4 percent and shares in Warsaw 0.7 percent. Romania's economy expanded 5.9 percent, also beating forecasts.

MSCI's benchmark emerging stocks index was up 0.5 percent, also helped by gains in Asia after North Korean leader Kim Jong Un delayed a decision to fire missiles towards the U.S. Pacific territory of Guam, as Pyongyang had previously threatened.

The United States said it was open to a dialogue, dialling down the warlike rhetoric which last week drove emerging stocks to one-month lows.

South Korean stocks rose 0.6 percent to one-week highs as markets reopened after Tuesday's public holiday. The won firmed 0.6 percent against the dollar, having hit its lowest in a month last Friday.

Even though upbeat U.S. retail sales data have raised the chance of another rate rise by the Federal Reserve this year , Christensen said the fact that American consumers were spending was good news for export-oriented emerging markets.

The market is now awaiting the release of Fed meeting minutes to shed further light on the pace of tightening.

"We have a base case they will raise rates in December and announce quantitative tightening in September, but (the latter) will have a fairly benign impact on emerging markets as with the current pace of rate hikes it should be manageable," said Jakob Christensen, head of emerging markets research at Danske Bank.

Hong Kong shares rose 0.9 percent, India gained 0.7 percent and Indonesia rose 0.6 percent to a one-month high. Indonesia's president has proposed a 2018 budget based on economic growth of 5.4 percent next year, faster than the 5.2 percent target in 2017.

Chinese mainland shares underperformed, slipping 0.1 percent after new loans fell to an eight-month low in July, reinforcing views that economic growth will cool in coming months.

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