EMERGING MARKETS-Emerging market stocks crash on diminishing Fed cut hopes

By Nikhil Sharma

Nov 14 (Reuters) - Emerging market stocks joined a global selloff on Friday after hawkish Federal Reserve comments dimmed expectations for a U.S. rate cut next month, triggering risk aversion that has trimmed gains from earlier in the week.

MSCI's index of emerging market stocks .MSCIEF sank 1.7% - on track for its worst single-day fall since April 7, when U.S. President Donald Trump's tariff announcements sparked fears of a global downturn, forcing investors to dump equities.

The day's selloff erased most of the gains accumulated earlier this week in the run-up to the end of the longest U.S. government shutdown in history, reducing equity gains to just 0.3% week-to-date.

For the month, the region-wide equity index was down 1.1% and could end November in the red if losses hold, marking its first monthly decline of 2025. However, it is still up about 29% this year, on track for its best performance since 2017.

A broader gauge for EM currencies .MIEM00000CUS was largely stable and remained on track for a weekly advance, up 0.2% week-to-date, supported by a weaker dollar.

An increasing number of Fed policymakers have expressed reluctance to ease rates further, citing persistent price pressures and a firm labor market despite two U.S. rate cuts earlier this year.

Market participants are pricing in a 50.5% chance of a hold verdict at the Fed's December meeting. 0#USDIRPR

"Expectations of a Fed interest rate cut next month have slumped to 50%; a month ago, a rate cut was a near certainty. This could limit any chance of a stock market recovery until we see the latest U.S. economic data now that the government shutdown has ended," Kathleen Brooks, research director at XTB, said in a note.

Wall Street futures pointed to a lower open, while Asian emerging markets .MIMS00000PUS were also severely bruised, down nearly 2%.

In Central-Eastern Europe, Poland's main stock index .WIG20 was down 1.25% on the day, dragged by a 3.2% fall in state-run copper producer KGHM KGH.WA after it reported third-quarter results.

The zloty currency EURPLN= was largely steady as consumer prices remained stable in October. The zloty was up 0.2% week-to-date.

The Hungarian forint EURHUF= was set for its worst week in a month, weighed down by a government announcement this week it would raise deficit targets for 2025 and 2026. Budapest stocks .BUX fell 0.26%, but were up 0.6% for the week.

The Czech koruna EURCZK= and Prague's main stock index .PX remained on track for their best week since early August, even as the assets were down on the day.

In Romania, Bucharest stocks .BUX fell 0.2% and the leu currency EURRON= was flat on Friday. Data showed the economy contracted quarter-on-quarter in the third quarter as higher electricity prices and tax hikes depressed domestic demand, but still beat annual growth expectations.

Rising electricity prices and tax hikes prompted Romania's central bank to keep rates at 6.5% this week and raise its annual inflation forecast for this year and next.

Elsewhere, Senegal's international bonds suffered a record selloff this week, dragged down by a lack of progress on a new loan program with the International Monetary Fund and by ongoing political infighting.

On Thursday, the IMF revealed it was working with the country to finalize an agreement on reforms to underpin a new program.

The 2031 maturity XS2838363476=TE was trading at 68.047 cents on the dollar — a level considered to be entering "distressed" territory — and has fallen about 10 cents this week in its worst weekly slump on record.

The South Korean won currency KRW= reversed early losses to jump 0.9% on suspected government intervention. Authorities vowed to take measures to stabilise a wobbly currency, including enlisting support from the national pension fund.

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