EMERGING MARKETS-Stocks 20% above March lows, FX gains; all eyes on U.S. GDP, Fed meet

* MSCI EM stocks index at highest since March 12

* Turkish lira flat as economic sentiment plummets

* Fed unlikely to make major moves- Analyst

By Ambar Warrick

April 29 (Reuters) – Emerging market stocks rose to a nearly seven-week high on Wednesday, underpinned by optimism over major economies emerging from COVID-19 related lockdowns, while a recovery in oil prices and better-than-expected earnings also helped.

The MSCI’s index of emerging market stocks added 0.9% and touched its highest level since March 12. The index has recovered more than 20% from lows hit in March, but it is still well below peaks touched in January.

Investors were hopeful about parts of the United States and Europe gradually reducing restrictions on social and business activity, as the rate of new infections slowed.

The prospect of some recovery in demand pushed up oil prices, while strong earnings from U.S. technology majors showed that some sectors stood to benefit from the outbreak.

Developing world currencies also gained as the U.S. dollar weakened ahead of a policy decision by the Federal Reserve and first-quarter GDP data from the world’s largest economy.

The MSCI’s index of emerging market currencies rose 0.4%.

“The Fed is unlikely to make any major policy moves today, having already pledged trillions in emergency lending measures, while having an open-ended commitment to purchase assets under its QE programme,” Han Tan, a market analyst at FXTM, wrote in a note.

“The U.S. Q1 GDP print is widely expected to officially herald the end of the economy’s record expansion… although the backward-looking data is unlikely to have a major impact on markets, it does form the base for the Q2 print, which is widely forecast to plunge into negative double-digit territory.”

Russia’s rouble rose about 0.5% on gains in oil prices, while stocks added 1%.

The country is somewhat better placed than its emerging market peers to handle the coronavirus outbreak, given that its central bank acted much later in cutting rates and has flagged enough space for further action.

Turkey’s lira underperformed its peers for the day after data showed the country’s economic confidence plummeting 44% in April, due to the virus.

Turkish stocks rose slightly. With industrial production grinding to a halt in the country, and doubts persisting over the central bank’s forex reserves, the Turkish economy is expected to take a significant hit from the virus.

Central European currencies such as the Hungarian forint and the Polish zloty rose slightly to the euro and the dollar.

For GRAPHIC on emerging market FX performance in 2020, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2020, see tmsnrt.rs/2OusNdX

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For CENTRAL EUROPE market report, see

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For RUSSIAN market report, see (Reporting by Ambar Warrick in Bengaluru; Editing by Rashmi Aich)

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