EMERGING MARKETS-Stocks, currencies resume slide on global growth worries

By Chris Vellacott

LONDON Wed Oct 8, 2014 5:54am EDT

LONDON Oct 8 (Reuters) - Emerging equities and currencies resumed their slide on Wednesday, weighed down by global economic weakness, while falling oil prices caused the battered rouble to slip further.

The MSCI emerging equities index dropped 0.75 percent with sentiment battered by overnight losses on Wall Street and other global markets.

Weighing on investors' minds was evidence that a robust global growth recovery is proving elusive.

The International Monetary Fund on Tuesday cut global economic growth forecasts for the third time this year, warning of weaker growth in core euro zone countries, Japan and emerging markets such as Brazil.

"Global sentiment is everything at the moment," said Lars Christensen, head of emerging markets at Danske Bank.

"The decline in commodity prices is really a mega-driver here, whether that is driven by fears about Fed tightening or about Chinese growth worries is less certain, but there is no doubt this is a very, very global story here feeding through."

Growth in China's services sector weakened slightly in September as new business cooled, though many investors bet the data would prompt further stimulus measures from Beijing.

Though Hong Kong's Hang Seng dropped 0.7 percent, China bucked the trend as its markets opened following a week-long holiday, with the Shanghai Composite Index up 0.8 percent after hitting its highest level since February 2013.

However, a double whammy of a strengthening U.S. dollar and a weakening oil price means there is no respite for Russian markets. The dollar-denominated RTS index fell 1.2 pct, while the rouble briefly touched 40.02 per dollar before inching higher again.

Pallid global growth sent Brent crude below $91 a barrel on Wednesday to its lowest since June 2012, holding to a months-long tumble in prices.

The Russian central bank shifted the boundaries of its floating rouble corridor by 5 kopecks on Tuesday, following market interventions to curb the pace of the currency's decline.

Interventions on Friday and Monday amounted to about $1.4 billion. As of Oct. 7, the new corridor extended from 35.65 to 44.65 to a dollar-euro basket, compared with 35.60 to 44.60 previously.

Turkey's lira also weakened with the advance of Islamic State militants into a Syrian town close to the Turkish border heightening investor nerves.

"The Turkish markets under any circumstances in this kind of global environment would be doing badly. And obviously you do not want a war on your borders," Christensen said.

South Africa's rand fell against the dollar on Wednesday as the euphoria from President Jacob Zuma appointing a new central bank governor wore off and markets looked ahead to a U.S. Federal Reserve policy statement.

Markets are pricing in higher interest rates in the world's biggest economy, which would whittle down investors' appetite for high-yielding emerging market assets like the rand.

Eastern European currencies lost ground in the wake of weak German data, with Poland's zloty easing slightly against the euro ahead of a Polish central bank meeting where it is expected to deliver its first rate cut in over a year.

Earlier in Asia, most currencies eased and the Indonesian central bank was suspected of intervening to lift the rupiah off eight-month lows

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 Karin Strohecker; Editing by Crispian Balmer)

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