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Chinese shares close around 1% lower, HK down as well

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EM stocks down 0.7%, set for weekly losses

By Shashwat Chauhan

May 24 (Reuters) - Most emerging market currencies were

on track for weekly losses on Friday as ebbing expectations for

Federal Reserve interest rate cuts supported the dollar, while

developing world stocks were set for their first weekly drop in

five.

Shares in China closed around 1% lower as

global risk sentiment soured on the prospects of U.S. rates

remaining elevated for longer following recent data and hawkish

minutes from the Fed's last policy meeting.

Data on Thursday showed weekly jobless claims fell last

week, pointing to underlying strength in the labour market,

while a separate reading showed U.S. business activity

accelerated to its highest level in just over two years in May.

"Indications across the board were that the U.S. economy

continues to fire on all cylinders, defying some other leading

indicators that had hinted at the possibility of a slowdown,"

analysts at Monex Europe said in a note.

MSCI's index for emerging market stocks shed 0.7%,

on track to log a weekly fall of over 1%. Shares in Hong Kong

were the worst hit this week amongst major EMs, down

close to 5%.

The EM stocks index had touched an over two-year high

earlier this week as global investors bet the Fed could kick-off

its rate easing cycle soon. However, the recent re-adjustment

has weighed on EMs and pushed the dollar higher.

China's yuan recorded its biggest weekly fall in

over two months in onshore trading, hovering near its lowest

level in close to four weeks at 7.24 per dollar.

Investors also kept tabs on geopolitics as China staged mock

missile strikes in waters east of Taiwan and dispatched fighter

jets carrying live missiles and bombers as part of two-day

exercises, state television CCTV said.

Currencies in Central Eastern Europe were muted, though most

were set for weekly losses with Poland's zloty the

worst hit.

South Africa's rand edged 0.2% higher, though on

track for steep weekly losses heading into general elections

next week.

Stocks in Johannesburg shed 0.3%, their fourth

successive daily decline.

Russia's rouble rose 0.3% against the dollar,

on track to extend gains to a tenth straight session.

EM debt saw inflows for the second straight week in the week

to Wednesday, while equities saw inflows for the first time in

three weeks, Bank of America data showed.

HIGHLIGHTS:

** IMF, Pakistan make significant progress on new loan, IMF

mission says

** India's new government will be spoilt for choice with $25

bln extra in kitty

** G7 officials play down expectations on details of loan

for Ukraine

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see