EMERGING MARKETS-EM assets weaken as Iran impasse lifts oil and curbs risk appetite

By Utkarsh Hathi

Sept 28 (Reuters) - Emerging-market stocks fell to a one-week low on Monday, as a stalemate in US-Iran talks pushed oil prices higher and curbed risk appetite, while currencies traded mixed against the dollar at the start of a data-heavy week across developing economies.

Brent crude rose 1.3% after US President Donald Trump rejected Iran's offer to resolve the conflict and reopen the Strait of Hormuz, stoking concerns about prolonged energy supply disruption. O/R

MSCI's index tracking EM equities .MSCIEF slipped 1.1% to a one-week low.

Turkish equities remained under pressure even as authorities lifted asset-freeze orders on 46 companies. The benchmark BIST 100 index .XU100 fell 2.6%. It has lost more than 10% in the previous two weeks as a probe into alleged market manipulation linked to investment funds rattled investors.

Elsewhere in emerging Europe, Hungary's benchmark index .BUX rose 0.5%, while the Romanian benchmark .BETI fell 1.7%. Most currencies in the region weakened against the euro, with the Hungarian forint dropping 1.2%, while the Polish zloty was down 0.2%. Poland's September inflation data is due later in the week.

"We remain bearish and expect the zloty to underperform its CEE peers, reflecting the region’s highest inflation and a dovish central bank," said Frantisek Taborsky, EMEA FX & FI strategist, ING.

MSCI's EM currency index .MIEM00000CUS was little changed on the day, headed for its best quarter since June last year.

"The outperformance confirms our long-held view of the resilience of EM countries, which is supported by structural macroeconomic improvements," said Guillaume Tresca, senior emerging market strategist at Generali Investments.

"This resilience can persist as long as the US dollar does not strengthen meaningfully."

However, currencies of countries with persistent current account deficits, including Indonesia, India, and the Philippines have lagged peers. These economies remain vulnerable to tighter US monetary policy as they rely on foreign capital inflows to help finance external funding needs.

South Africa's rand slipped 1%, while its stocks .JTOPI fell 1.9% to more than a two-month low, tracking gold prices that hit a seven-week low.

Most Asian assets traded lower, as the tech-heavy South Korean benchmark .KS11 fell 2.7%, while the Indonesian rupiah and Thailand's baht weakened more than 0.5% each, with the latter hitting a two-month low.

Investors now await US Personal Consumption Expenditures price index figures, the Federal Reserve's preferred inflation gauge, as well as August payrolls data, both scheduled to be released later in the week. Markets will also be attentive to a packed economic data calendar across developing economies.

Separately, S&P lowered Mozambique's currency rating to "CCC" with a negative outlook on Friday, though bonds were little changed after the rating downgrade.

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see CEE/