China Rally Loses Steam, India Wobbles: Emerging-Market Snapshot

(Bloomberg) -- A day of reversals: China’s stock market initially managed to build on Monday’s 5.6 percent gain, before drifting into negative territory by the end of the day to lose 0.7 percent, ostensibly amid concern about over-extended leverage. India’s Sensex got pummeled by concern over an air-strike inside Pakistan, sliding as much as 1.4 percent before clawing back some of the losses.

The declines contrived to pull the MSCI emerging-market stocks index lower for the first time in seven days.

The picture in the foreign-exchange markets wasn’t much better, with only the won and the rupiah carving out meaningful gains -- of about 0.2 percent -- and the rest of the pack led lower by the more liquid rand, ruble and Mexican peso. Emerging-market bond yields widened by an average of 2 basis points versus Treasuries, according to a JPMorgan Chase & Co. index.

If you could take your eyes off of China, Indian markets grabbed most of the attention as warplanes were reported to have struck at an alleged terrorist training camp inside Pakistan. The rupee, stocks and bonds tumbled in knee-jerk tandem, taking the sheen off Monday’s big-flow day, which had helped to erase the market’s year-to-date decline.

Nigerian markets were little changed as initial results from the delayed weekend election suggested the current incumbent, President Muhammadu Buhari, held an early lead, prompting upset from Atiku Abubakar, the main opposition candidate who is slightly more favored by markets.

Hungarian policy makers were due to meet. Though no rate change is forecast, investors were braced for a hawkish turn of language -- something of a rarity in these days of global policy easing.

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