EMERGING MARKETS-EM stocks snap seven-day winning streak as AI fatigue grips; on track for monthly gains

By Pranav Kashyap

Feb 27 (Reuters) - Most emerging-market stocks and currencies fell on Friday but headed into the end of February after a bumper week with a gain for the month, which was dominated by rate decisions, heavyweight data drops and fresh nerves around the AI trade.

The benchmark EM equity index .MSCIEF slipped 0.5% on the day, snapping a seven-session winning run. A comparable gauge for EM currencies .MIEM00000CUS fell 0.3%, ending a five-day streak of gains.

Nvidia's NVDA.O results on Wednesday failed to deliver the jolt some investors were hoping for. Upbeat forecasts were quickly drowned out by familiar fears of hairline cracks in the AI-driven rally and the drag of stretched tech valuations.

Add in lingering uncertainty around President Donald Trump's tariff plans and simmering geopolitical tensions, and markets had enough ingredients for a cautious step back.

"A combination of factors has contributed to the steady drift lower. AI-driven bull-flattening into a more two-way, catalyst-dependent trading environment," said Adam Kurpiel at Societe Generale.

In central and eastern Europe, shares were mixed.

Romanian stocks .BETI were up 0.6%, while the leu EURRON= was flat. Romania's consolidated budget deficit edged into a surplus of 0.04% of economic output in January, for the first time since 2019. However, the country is still yet to approve a budget for this year.

Fitch was to review Poland's credit rating later in the day.

In South Asia, Mumbai's .NSEI benchmark was down 0.7%.

Pakistan's international dollar bonds slipped, Islamabad equities .KSE fell 0.3%, and the rupee PKR= was little changed versus the dollar after Pakistan struck targets linked to the Taliban government in major Afghan cities overnight.

Even so, this week's bouts of risk-off sentiment haven't derailed the broader EM run. The equity index remained on track for a third consecutive monthly advance. The currencies index was also on course for a third straight monthly gain, and a third straight weekly rise.

Morgan Stanley raised the EM equity gauge's target, which was up 14% year-to-date, to 1,700 points. But the brokerage said it continued to anticipate a high degree of volatility through the year and emphasised stock-picking.

South Korean equities .KS11 have been at the forefront of the rally, up nearly 50% this year.

Turkey, meanwhile, looked set for a modest 0.3% monthly gain in equities .XU100, a sharp comedown from January's 23% surge.

Earlier this month, Istanbul widened its year-end inflation range after a string of hotter inflation prints cooled expectations for faster rate cuts. Separately, unemployment ticked up to 8.1% in January.

Johannesburg stocks .JTOPI were headed for a 14th straight month of gains and their best week since April 2025 after markets gave the national budget a positive reception.

Across the broader EM landscape, a flood of inflation readings this month showed economic resilience was holding, and the numbers didn't set off fresh alarm bells, helping keep sentiment supported.

On the day, Ukraine's international dollar bonds rose after the International Monetary Fund's executive board approved an $8.1 billion, four-year loan for Ukraine, with $1.5 billion to be disbursed immediately to help keep the government running.