EMERGING MARKETS-EM equities retreat due to geopolitical tensions, US data on watch

By Twesha Dikshit and Ragini Mathur

Jan 7 (Reuters) - Emerging markets equities retreated on Wednesday, after touching record highs earlier this week, as markets weighed intensifying geopolitical tensions and awaited U.S. data sets for clues on the monetary policy path forward.

U.S. President Donald Trump unveiled a plan to refine and sell up to 50 million barrels of Venezuelan oil that had been stuck under the U.S. blockade. Oil prices fell.

Separately, the White House said Trump was discussing options for acquiring Greenland, including through potential military action, despite European objections.

"Event risk early into 2026 has put global commodities and related assets into focus, far more so than the semiconductor and AI view that was expected to dominate proceedings," BNY's EMEA macro strategist Geoff Yu said in a note.

"The current drivers for commodities are also largely independent of monetary policy moves, with supply concerns arising from tariffs and geopolitics leading the price action."

Copper prices hovered near record highs, with nickel and iron ore elevated near multi-month peaks. BNY expects Chile to be a beneficiary of surging metal prices.

The MSCI emerging market stock index .MSCIEF dipped 0.3%, after an eighth consecutive session of gains. A corresponding currency gauge .MIEM00000CUS was flat.

DATA, DOMESTIC POLICY DRIVE MOVES

Saudi Arabia's benchmark index .TASI rose as much as 2% after the Gulf country's market regulator said it plans to open its financial markets to all foreign investors from next month.

The Czech krona EURCZK= dropped 0.3% against the euro, while equities .PX edged up. The country's headline inflation was unchanged at just above the central bank's 2% target in December, according to preliminary data. However, interest rates are expected to stay steady with services prices elevated.

Poland's equity index .WIG20 added 0.7% while Romania's .BETI rose 1.9%. Both were closed on Tuesday for a public holiday.

Markets will closely assess U.S. data including the JOLTS survey and ADP private payrolls due later in the day as well as a key monthly employment report due on Friday. Two more Fed rate cuts are priced in for the year but any surprises on the data front could alter expectations.

Over in Asia, stocks retreated from all time highs with indexes in Taiwan .TWII and Hong Kong .HSI pulling back. Vietnam equities .VNI were a bright spot, rising 2.5% to scale a record peak.

In trade-related updates, the European Commission appeared to have won the crucial support of Italy on Tuesday for a contentious free trade deal with South American bloc Mercosur, paving the way for the agreement to be signed as early as next week.

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