EMERGING MARKETS-Stocks rise, Russian markets gain on rate cut hopes

* MSCI’s EM stocks index set to add 1.4% for the week

* Turkish stocks lead gains for the day, lira lags

* Russian central bank seen cutting rates by 100 bps

By Ambar Warrick

June 19 (Reuters) – Emerging market stocks were set for weekly gains on Friday as investors looked to monetary stimulus to fuel a post-coronavirus recovery, while markets awaited a Russian central bank meeting at which a cut in interest rates is widely anticipated.

The MSCI’s index of emerging market stocks rose 0.6% and was set to add about 1.4% for the week after actions by major central banks, which has inspired some confidence in equities.

Bourses in China and India provided the most support to the MSCI index on Friday, while Turkish stocks led gains in Europe, the Middle East and Africa with a rise of about 1%.

“If interest rates persist at current levels, global equity risk premiums could fall another 80–100bps over the next six months, supporting further upside,” Mark Haefele, Chief Investment Officer, Global Wealth Management at UBS, wrote.

Russian stocks rose about 1%, while the rouble added 0.4% ahead of a widely expected interest rate cut.

Elvira Nabiullina, the Russian central bank governor, has said it would consider a sharp cut “among other options” to support the economy through the coronavirus crisis.

“We believe the central bank will likely cut the policy rate by 100bps, to 4.50%,” Credit Suisse analysts wrote in a note.

Developing world stocks have stuck to a tight trading range over the past week, similar to a range seen in April, where markets had rallied sharply from March-lows before sticking to a holding pattern for nearly two months.

Emerging market currencies were muted, as fears of a second wave of coronavirus infections spurred safe haven demand for the U.S. dollar and gold.

Turkey’s lira lagged its regional peers, while in central Europe the Hungarian forint and the Polish zloty weakened against the euro.

Poland’s budget deficit rose to almost 26 billion zlotys at the end of May, from 18.9 billion in April, as the country ramps up spending to limit damage from the pandemic.

For GRAPHIC on emerging market FX performance in 2020, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2020, see tmsnrt.rs/2OusNdX

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