*

China markets closed Oct. 1-7 for National Day holidays

*

Sri Lanka to discuss shape of IMF deal in Washington

meetings

*

CEE's manufacturing downturn continues but bright spots

appear

*

Turkish manufacturing sector contracts further in Sept

By Ankika Biswas

Oct 1 (Reuters) - Emerging market stocks and currencies

started October on a sombre note, as Federal Reserve Chair

Jerome Powell's latest comments pared hopes of hefty U.S. rate

cuts, pruning investors' risk-on mood after a strong month for

the asset classes.

As Powell indicated only quarter-percentage-point rate

reductions and even added that there's no hurry to cut in light

of new encouraging economic data, CME's FedWatch Tool showed

market participants pulled back their bets of another oversized

50-basis-point rate cut in November.

"While the Fed did move aggressively in September, there is

no guarantee that it would have to cut by the same magnitude

again... Moreover, between now to the next meeting, the Fed has

to consider two sets of NFP (non-farm payrolls) prints and

arguably, sentiment around the U.S. Presidential elections,"

said DBS strategists.

With the dollar index firming against its major

peers, and with heavy-weight Chinese financial markets shut for

trading due to public holidays, the recent rally in EM assets

came to a halt.

The MSCI index for EM stocks edged 0.1% lower,

after logging its best month in 10 on the back of positive

developments in the world's largest economies -- China's series

of policy measures to lift its ailing economy and the Federal

Reserve's 50-bps cut in September.

The currencies index, too, slipped 0.4%

after notching its first three-month winning streak for the

first time this year.

Markets were also focused on a series of manufacturing

readings to gauge the economic health of some major EMs.

Czech manufacturing declined further in September and

Hungary's manufacturing activity contracted for a fourth

straight month, while Poland's manufacturing sector showed signs

of stabilisation, with the downturn easing for the third

consecutive month.

While the Czech crown edged 0.1% lower against the

euro to stay at its August lows, the Polish zloty

firmed 0.1% and the blue-chip index dropped 1% ahead of

its monetary policy decision on Wednesday.

Among others, Turkish factory activity contracted for the

sixth month in a row in September, with output, employment and

purchasing activity all declining.

The South African rand weakened 0.2% against the

dollar, ahead of its domestic manufacturing PMI data.

Meanwhile, Sri Lanka is set to have detailed talks with the

IMF on the framework of a $2.9 billion bailout programme on the

sidelines of the lender's annual meetings in Washington later

this month.

The country's benchmark index climbed 1% to its July

highs, with the rupee hitting its highest level since

June 2023 against the greenback.

HIGHLIGHTS:

** Global investors call time on their exodus from China

** Jamaica cuts interest rate by 25 basis points

** Czech government majority set to shrink after minister

dismissed

** Saudi Arabia expects 2024 deficit to widen to 3% of GDP