* Factory activity slows in Asia and Europe
* EM assets hit one-month low after Fed comments
* Czech Koruna slips on dour business sentiment
By Agamoni Ghosh
Aug 1 (Reuters) – Emerging market assets fell to one-month lows on Thursday after the U.S. central bank dampened hopes for a long rate-cutting campaign, even as weak global factory data showed the impact a drawnout U.S.-China trade war was having on economic growth.
The U.S. Federal Reserve cut interest rates as expected on Wednesday but chief Jerome Powell said the move might not be the start of a lengthy campaign to shore up the economy against risks, disappointing investors who hoped for a more dovish stance.
Emerging market shares fell 0.8%, while currencies which had rallied so far in anticipation of a more supportive stance by the Fed fell, as the dollar index rose to a two-year peak.
“Powell described the mood as a mid-mid-cycle adjustment, and markets are worried that means there isn’t much more easing coming,” said Kit Juckes, macro strategist at Societe Generale in a note.
“That is cue for equity market weakness and further dollar strength.”
Adding to the gloom, data from Asian and European economies showed manufacturing activity had contracted further in July, fuelling worries that the Sino-U.S. trade dispute and a slowdown in China could tilt the world towards a global recession.
Asian emerging stocks were the hardest hit with mainland China shares leading declines, while South Korea’s Kospi hit their lowest level this year as Seoul and Tokyo wrangled over export restrictions.
Indices outside Asia also slipped, with stocks in Moscow falling nearly half a percent, while those in Johannesburg down 0.3%.
Developing world currencies were down across the board with South Africa’s rand taking the biggest losses. A rally for the Turkish lira since an interest rate cut last week paused, as the currency moved 0.3% lower.
The Czech crown shed 0.2% of its value against the euro after data showed manufacturing business sentiment in the Eastern European economy fell to a 10-year low in July, sharply below analysts’ forecast.
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