(Corrects location of Brazil match para 16)
By Carolyn Cohn
LONDON, July 9 (Reuters) - Emerging stocks fell 0.4 percent to six-day lows on Wednesday after lower-than-expected inflation data pointed to weakness in China’s economy, but expectations of continued low U.S. rates gave some support.
Chinese stocks dropped more than 1 percent after data showing CPI inflation at 2.3 percent in June, from 2.5 percent in May. Tech firms led losses following a tumble overnight in U.S. stock markets ahead of the earnings season.
Emerging market investors also looked to the minutes of the Federal Reserve’s meeting, due later on Wednesday.
High-yielding emerging markets are benefiting from expectations a U.S. interest rate rise is still some way off.
“(Federal Reserve Chair Janet) Yellen seems committed to keeping forward guidance in such a way that it doesn’t spook markets (and) that she can keep her dovish bent that’s what’s anchoring markets. We are still seeing strong inflows in emerging markets and we’re being supported by forward guidance,” said Ishitaa Sharma, emerging markets strategist at Citi.
The MSCI emerging equities index fell 0.4 percent, retreating from the previous session’s 13-month highs.
China guided the yuan towards a three-month high against the dollar in what traders said was possibly a political move as China and the United States started their annual Strategic and Economic Dialogue.
The rouble rose to its highest in a week though Russian stocks fell.
Russia has not responded to Ukraine’s talk of clearing pro-Russian rebels from the eastern cities of Donetsk and Luhansk, spurring hopes the conflict will soon be over, but a slump in car sales hit Russian consumer stocks.
Indonesia’s rupiah rose sharply to a five-week high in offshore forwards markets as Jakarta Governor Joko Widodo looked to be heading for a narrow victory in presidential elections, in what would be a triumph for a new breed of politician that has emerged in the fledgling democracy.
Domestic Indonesian markets were closed on Wednesday.
The shekel fell to a two-week low and Israel’s five-year credit default swaps rose 5 basis points to an eight-week high of 82 bps, according to Markit, after further tensions between Israel and the Gaza Strip.
At least two rockets fired from the Gaza Strip at Tel Aviv on Wednesday were shot down mid-air by Israel’s Iron Dome defence system, the Israeli military said.
This followed further strikes by Israel on Gaza overnight.
The rand hit a one-week high ahead of the Fed minutes, buoyed also by hopes of an imminent resolution to an eight-day work stoppage by more than 200,000 workers in South Africa’s metals and engineering sector.
Brazil’s five-year credit default swaps ticked up one basis point to five-week highs of 148 bps after Tuesday’s heavy defeat for Brazil at the hands of Germany in the soccer World Cup in Belo Horizonte.
“The tournament provided a respite from smouldering civil frustrations, which could potentially return now that the home team is out of the games and fans are no longer glued to their couches,” said analysts at Societe Generale in a client note.
BRICS nations will launch their own development bank at a summit in Brazil next week, with headquarters in either Shanghai or New Delhi, Russia’s finance minister said on Wednesday.
For GRAPHIC on emerging market FX performance 2014, see link.reuters.com/jus35t
For GRAPHIC on MSCI emerging index performance 2014, see link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2014, see link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2014, see link.reuters.com/zyh97s
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see ) (Additional reporting by Chris Vellacott, editing by William Hardy)