EMERGING MARKETS-EM stocks eye best week since September 2024; Russia awaits rate decision

By Pranav Kashyap and Twesha Dikshit

Sept 12 (Reuters) - An index tracking emerging market stocks was on track for its best week since September 2024 on Friday, even as Turkey's stocks lingered near two‑month lows and Russia braced for an interest rate decision later in the day.

The risk mood in Turkey remained grim. Istanbul stocks .XU100 fell for a third straight week and the lira TRY=, one of the year's weakest performers, flirted with a 10th consecutive weekly loss despite a modest 0.2% bounce on the day.

Turkish assets have come under pressure as President Tayyip Erdogan's main opposition has faced a legal crackdown. Attention now pivots to whether the main opposition leader is ousted from his post in a Monday court ruling — a test of Turkey's fragile balance between democracy and autocracy.

Separately, the central bank on Thursday slowed its easing cycle with a 250 basis-point rate cut.

"The focus will remain on politics and the crackdown on the CHP party. Although inflation is set to slow gradually, it will exceed the central bank's target," said Phoenix Kalen, head of EM strategy at Societe Generale.

"We anticipate that the policy of gradual lira depreciation will continue."

Russia's rouble RUB= is on track for its worst week of 2025 - off more than 4% on the week - as the central bank was poised to trim rates to roughly 16% and the conflict in Ukraine keeps draining Russia's slowing economy.

The rouble's slump was stoking fresh worries over a flat-lining economy, a swelling budget gap, and looming Western sanctions that could hit buyers of Russian oil—Moscow's main source of revenue.

Expectations of a rate cut by the Federal Reserve kept EM assets humming even as politics roiled from Ankara to Buenos Aires to Jakarta. With cracks widening in U.S. jobs data, analysts note investors are nudging money out of Wall Street.

The MSCI EM equity gauge .MSCIEF leapt 1.2% to its highest in more than four years and is set for a sixth consecutive advance, while EM currencies edged higher for the week.

Chinese domestic AI optimism and relatively low political noise drew inflows and continued to lift local equities. The Shanghai Composite .SSEC was at its highest since August 2015 and keeping the CSI 300 .CSI300 was near a peak last seen in March 2022, while Hong Kong's Hang Seng hovered near its best level since August 2021.

Meanwhile, Moody's reviews Romania credit rating later in the day, with the country clinging to the last rung of investment grade, with negative outlooks across the board.

The leu EURRON= was little changed, while stocks in Bucharest .BETI inched up 0.1%.

Romania sits at the cusp of investment grade with negative outlooks, even after a new coalition rammed through tax and spending measures to tame a deficit that is the biggest in the EU—and helped push inflation to its highest since mid‑2023.

The International Monetary Fund forecast slower growth in Romania this year and urged the country to push ahead with fiscal consolidation plans as it battles with EU's highest budget gap and the risk of a credit downgrade.

Indian equities .NSEI, .BSESN were up 0.5% ahead of the country's August inflation data.

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