EMERGING MARKETS-Stocks, FX rise as US and Iran signal willingness to negotiate

By Johann M Cherian

April 14 (Reuters) - Stocks and currencies across emerging markets rose on Tuesday, buoyed by signs that Washington and Tehran were open to negotiating an end to the conflict, a day after the U.S. military began a blockade of Iranian ports.

Negotiating teams from the U.S. and Iran could return to Islamabad this week, four sources told Reuters, days after the highest-level talks between the two countries ended in Pakistan without a breakthrough.

The report reinforced hopes for a resolution after U.S. and Pakistani officials had said earlier that efforts were being made to resolve the conflict. Prices of crude oil, a key resource for developing economies, slipped below $90 a barrel.

"Whether the U.S. can effectively blockade the Strait of Hormuz remains to be seen, but the move is likely to exert pressure on Iran given the Islamic Republic’s reliance on oil exports for its economy," a group of analysts at UBS said in a note.

Reflecting investor appetite for riskier assets, MSCI's index tracking emerging market equities MSCIEF rose 1.9% to an over one-month high, while an index tracking regional currencies .MIEM00000CUS climbed 0.5% as the dollar slipped.

Global markets have been riding the ebb and flow of developments in the Middle East for more than a month as investors assessed the long-term implications of the conflict on the global economy.

Brokerages, meanwhile, have offered mixed recommendations on emerging markets.

Citigroup downgraded emerging market equities to "neutral", flagging energy vulnerability; however, BlackRock Investment Institute turned overweight on EM stocks, citing strong earnings.

IMF, WORLD BANK MEETINGS IN SPOTLIGHT

Commentary and forecasts from policymakers and finance officials at the International Monetary Fund and the World Bank spring meetings will be scrutinized throughout this week.

The fund's World Economic Outlook, due later in the day, will offer insights into how the global economy could fare amid prolonged geopolitical tensions and supply disruptions.

Latest data and policy actions across developing markets have reflected that higher costs are holding back demand.

China's export engine slowed sharply in March as the conflict triggered shocks to energy and transportation costs, hurting global demand, while in Romania, annual inflation rose in March to its highest level since mid-2023.

Beijing's offshore yuan CNH= was steady at a more than three-year high, while stocks .CSI300, .SSEC gained 1% on de-escalation hopes. Romania's leu EURRON= was flat and stocks .BETI edged up 0.8%.

Policymakers across countries were also exercising caution over interest rates and exploring policies to offset persistent higher costs.

The Singaporean central bank said it would slightly increase the rate of appreciation of the S$NEER policy band, while Poland's Ludwik Kotecki said it sees no room for rate cuts this year, according to a report.

South Korean President Lee Jae Myung warned of ongoing costs from the conflict, and the Philippines said it was seeking an extension of a U.S. waiver to buy Russian oil and petroleum products.

Meanwhile, the founder of China Evergrande Group 6666.HK, the poster child for the country's property woes, pleaded guilty to charges of fraud, following which shares jumped jumped 5.2% to a more than one-month high.

Hungarian stocks .BUX slipped 0.2% in choppy trading, trimming some of Monday's 5% surge, which was its largest since 2022, after long-time Prime Minister Viktor Orban's defeat in general elections held over the weekend.