EMERGING MARKETS-Stocks set for worst day in 1 month as virus fears resurface

* The Turkish lira worst EMEA performer

* Putin speech awaited amid increased geopolitical tensions

* South African rand flat after inflation data

April 21 (Reuters) – Emerging market stocks tumbled on Wednesday as a second wave of COVID-19 infections threatened further disruption in major economies, while Russia’s rouble weakened ahead of a speech on economic growth by President Vladmir Putin.

The MSCI’s index of emerging market stocks fell 1.1% and was poised for its worst day since March 24, with bourses across Asia weighing the most. New COVID-19 related restrictions in India threatened to throw a wrench into an otherwise steady global economic recovery.

The EM space has been hit hard by a second wave of COVID-19 infections this year, with India and Brazil ranking among the worst hit. The prospect of more curbs has threatened to upset an already tenuous recovery in EM.

The dollar recovered from seven-week lows amid waning appetite for risk-driven assets, though the unit remained constrained by low U.S. Treasury yields.

“The recent vaccine setbacks caused some uncertainty and might therefore have increased demand for U.S. Treasuries as a hedge against a return of the crisis,” Thu Lan Nguyen, FX and EM analyst at Commerzbank said.

“That also means though, that sentiment could change again quickly once it becomes clear that the global vaccination campaigns continue to make progress, albeit more slowly, so that an end of the pandemic remains foreseeable.”

Russia’s rouble traded a touch lower as investors awaited a speech from Putin, amid elevated tensions with Ukraine and the West, which had resulted in U.S. sanctions on Russian debt markets last week.

Still, recent strength in oil markets has supported the rouble, while Russian stocks hit record highs as major oil exporters benefited from strong prices.

Turkey’s lira led losses across EM currencies in Europe, the Middle East and Africa on Wednesday, after President Tayyip Erdogan replaced the Turkish trade minister, increasing speculation over a broader cabinet shakeup.

The South African rand was flat as inflation accelerated, as expected, last month. Investors are wary of any surprise jumps in inflation putting pressure on the central bank to tighten policy.

The currency has raced past its EM peers this year, recently touching a 15-month high, due to a relatively higher yield, which has made it an attractive destination for carry trade. The Mexican peso, which was trading near three-month highs, has also benefited from a similar situation.

For GRAPHIC on emerging market FX performance in 2021, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2021, see tmsnrt.rs/2OusNdX

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For RUSSIAN market report, see (Reporting by Ambar Warrick in Bengaluru, Editing by Sherry Jacob-Phillips)