EMERGING MARKETS-Stocks slide on weak China, Russia PMIs
By Jamie McGeever LONDON, Aug 5 (Reuters) - Emerging stocks fell on Tuesday after a survey showed China's service sector stagnated in July, its worst performance in nine years and highlighting risks to the world's developing market powerhouse. Russian stocks lagged after figures showed the country's service sector shrank last month, marking the fifth straight month of contraction. The fragile growth picture painted by these reports weighed on a market nervous about the outlook for the timing and pace of U.S. monetary policy tightening, and military, economic and diplomatic tensions between Russia and Ukraine. "Growth is still weak in emerging markets ... as fundamentals remain weak despite the developed market recovery," wrote Morgan Stanley analysts in a note to clients on Tuesday. Chinese stocks slipped around 0.2 percent, retreating from Monday's high for the year, while Russia's main indices slid 1 percent . The surprisingly weak purchasing managers index from China suggested more government support may be needed to keep the economy on track for 7.5 percent growth, while the Russian PMI highlighted businesses' nervousness about the Ukraine conflict and effect of Western sanctions. But the links between China's purchasing managers index and actual economic activity data are not that strong, said Neil Shearing, chief emerging markets economist at Capital Economics. "Last month's strong quarter two activity data dispelled fears about a hard landing, so the markets have taken news of the weak purchasing managers index in their stride," he said. The MSCI emerging equities index fell 0.2 percent, easing further from last week's near three-year high. India's central bank kept interest rates steady at 8 percent as expected, but warned of inflationary risks should a shortfall in monsoon rains lead to a surge in food prices. The rupee strengthened around a third of a percent to 60.75 per dollar, moving further away from a three-month low struck on Friday. Other emerging market currencies held their ground against the dollar on Tuesday. The Turkish lira rose around a third of a percent to 2.125 per dollar and the South African was flat at 10.65. 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 Andrew Winterbottom, editing by John Stonestreet)
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