Emerging Equities Eye One Week High, CEE FX Firm following French Vote

Emerging markets stocks rose towards a one-week high on Monday. Eastern European currencies appreciated against the euro in a broad relief rally after centrist candidate Emmanuel Macron's emphatic victory in the French presidential election.

Macron gained over 60 percent of the vote, defeating far right nationalist Marine Le Pen.

Moreover, Eastern European currencies strengthened following the result, as Macron's victory removed the Le Pen threat to EU structural fund transfers to big recipients Poland and Hungary.

Poland's zloty rose to 0.5 percent in early trade against the euro to test 20-month highs, whereas the Czech crown firmed 0.2 percent to hit its firmest level in a month and the Hungarian forint held steady near two-week highs.

Rabobank's strategist Piotr Matys says the scope for further gains was likely to prove limited given this outcome had been fully priced in.

"In fact, the CEEs may soften against the U.S. dollar in the coming days," he said in a note.

MSCI's benchmark emerging stocks index gained 0.7 percent, whereas Chinese mainland shares retreated 0.8 percent to four-month lows, hindered by investor fears over tightening regulations .

Bourses in emerging Europe also suffered. Polish shares fell 0.4 percent, dragged lower by a 3 percent tumble in copper producer KGHM thanks to falling prices in the industrial metal.

Copper prices fell to their lowest in four months after the latest trade data from China - the world's top consumer of the metal - showed imports of concentrate and ore fell in April from the previous month amid a subdued outlook for industrial activity. However, they rose compared to a year earlier.

The Russian rouble noted a fall of 0.3 percent decrease the dollar and the South African rand eased 0.5 percent.

"The market is just pulling back," said Cristian Maggio, head of emerging markets strategy at TD Securities, adding that some of the optimism in emerging markets that had developed after the French presidential first-round vote was now unwinding.

The yuan was steady on the day as data showed foreign exchange reserves had risen for a third straight month in April, beating market expectations as capital controls and a pause in the dollar's rally helped stem capital outflows.

According to Julian Evans-Pritchard, an economist at Capital Economics, the outflow of capital could gain pace in the forthcoming period, but the renminbi was now closer to fair value than a couple of years ago, and with the bulk of the dollar's appreciation behind it, he did not expect outflows to get out of control.

Read more at Reuters.