EMERGING MARKETS-EM equities set for first monthly decline this year with US rate cut path in focus

By Twesha Dikshit

Nov 28 (Reuters) - Emerging market assets dipped on Friday but were set for weekly gains as investors monitored the U.S. monetary policy path and kept an eye on developments that have weighed on global sentiment this week.

The MSCI index for emerging market equities .MSCIEF edged down 0.4% and was set for its first monthly decline this year, while the index for regional currencies .MIEM00000CUS dipped 0.1%.

Still, equities looked set for a gain of more than 2% for the week, after a sharp sell-off on concerns over lofty tech valuations, helped by shifting expectations for U.S. Federal Reserve rate cuts.

"Capital outflows from EMs have picked up over the past month, particularly from Asian equity markets which may reflect the broader drop in tech stocks globally," said Capital Economics' chief emerging markets economist William Jackson in a note.

"But the scale of outflows is limited and EMs' external positions are in strong shape, putting them in a good position to weather a much larger and sustained pullback in foreign financing."

Trading volumes were lighter with U.S. markets resuming for a shorter trading session following Thursday's closure due to the Thanksgiving holiday.

Meanwhile, an outage at the world's biggest exchange operator CME Group affected futures spanning foreign exchange, commodities, Treasuries and stocks, as well as freezing a handful of benchmarks.

UKRAINE, ECONOMIC INDICATORS IN FOCUS

Renewed efforts towards a peace negotiation between Ukraine and Russia had sent Ukrainian bonds rallying this week.

The Kremlin said on Friday that Russia wanted to advance towards peace in Ukraine, even as it maintained that President Volodymyr Zelenskiy's leadership was illegitimate.

Adding to pressure on Zelenskiy, Anti-corruption authorities in Ukraine said they conducted searches linked to the president's chief of staff and top peace negotiator Andriy Yermak.

Investors also kept a close eye on a slate of economic indicators, including unemployment rates in Turkey and Hungary and inflation numbers in Hungary and Poland.

The Czech economy rose by 0.8% on a quarterly basis and by 2.8% from the previous year, slightly higher than earlier flash estimates and the fastest year-on-year growth rate since mid-2022.

The benchmark PX Prague Index .PX added 0.1%, while the koruna EURCZK=R weakened against the euro.

The Hungarian forint EURHUF= was flat against the euro, while the Bucharest BETI Index .BETI rose 0.3%. Hungary's August-October unemployment rate was 4.6% compared to July-September's 4.5%.

Turkey's unemployment rate slipped 0.1 percentage points month-on-month to 8.5% in October, while investors examined the Central Bank's financial stability report. The lira TRY= weakened 0.2% against the greenback.

In Asia, South Korean shares .KS11 dropped 1.5% and Indonesian shares .JKSE fell 0.4%. The Philippines' equity index .PSI gained 0.9%.

HIGHLIGHTS:

CME glitch hits FX, commodities and stock futures

Ukraine “peace” would open an economic black hole

Bearish bets on Asian currencies intact as US rate cut worries linger

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For RUSSIAN market report, see RU/RUB