EMERGING MARKETS-EM equities hit record highs as investors monitor Venezuela developments

By Ragini Mathur and Twesha Dikshit

Jan 6 (Reuters) - Emerging market equities touched fresh peaks on Tuesday, mirroring global risk-on sentiment to start off the year, as investors kept a close eye on Washington's interventions in Venezuela and macroeconomic indicators.

The MSCI emerging market stock index .MSCIEF rose 1%, on track for its eighth consecutive session of gains.

Investors largely maintained composure despite the weekend's political upheaval in Venezuela, where U.S. military forces captured President Nicolas Maduro. Traders assessed potential implications for crude oil flows from Venezuela, home to the world's largest oil reserves. But the events had minimal impact on overall risk sentiment.

Market movements were primarily driven by momentum in equities, while currencies responded more to macroeconomic data releases.

Venezuela's international government bonds, meanwhile, continued their upward momentum, advancing as much as two cents to almost 42.13 cents on the dollar. The country's bonds, which went into default in 2017, outperformed last year and nearly doubled in price.

"We view the impact on capital markets as minimal. While Venezuela's oil reserves are massive, its energy infrastructure is in shambles, and current production sits at about 1% of global output," said Tom Nelson, head of market strategy at Franklin Templeton Investment Solutions.

ASIAN MARKETS LEAD THE CHARGE

The upward trajectory was particularly evident across Asian markets, with indices in Taiwan .TWII, Singapore .STI, and Indonesia .JKSE all reaching record peaks.

Turkey's benchmark equity index .XU100 gained 1.1%, a day after inflation data bolstered hopes for further rate cuts by the central bank. The main banking index .XBANK gained as much as 2%.

Indexes in Hungary .BUX and the Czech Republic .PX also traded higher.

The MSCI's currency gauge .MIEM00000CUS was flat. The U.S. dollar, which had initially surged to a four-week high in the prior session, subsequently relinquished all gains after data showed U.S. manufacturing activity slumped to a 14-month low.

The dollar faced additional pressure from dovish comments by Minneapolis Federal Reserve President Neel Kashkari, who told CNBC he sees risks of unemployment rates potentially "popping" higher. Kashkari holds a voting position on the Fed's rate-setting committee.

Investors expect at least two U.S. rate cuts in 2026, with Friday's upcoming non-farm payroll report expected to provide further monetary policy insights.

South Africa's rand ZAR= strengthened 0.2% against the dollar, while the country's stocks .JTOPI gained almost 1%. An S&P Global survey revealed South African business activity contracted sharply in December, marking its weakest performance since January last year.

Elsewhere, the Hungarian forint EURHUF= declined 0.7% against the euro, while markets in Poland and Romania remained closed for public holidays.

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