EMERGING MARKETS-EM stocks and FX fall on banking stress, oil drop

Emerging market stocks and currencies fell on Friday, capping a volatile week dominated by renewed trade jitters, while worries about the banking industry and a slide in oil prices added another layer of concern.

After shares of U.S. lenders fell on fears of exposure to bankrupt auto parts maker First Brands and subprime lender Tricolor, financials-heavy indexes in Europe and Asia came under pressure. Poland's blue-chip WIG20 index fell 1.2%, while PX Prague SE dropped 1.1%. The financials-heavy MSCI ASEAN index touched a two-month low and was last down nearly 1%. Turkey's banks fell 1.2%.

"There has not been a downturn or recession in over a decade that would have allowed regional banks to test their loan portfolios in times of stress, which would have allowed investors to better rank the sector based on credit quality," said J.P. Morgan analyst Anthony Elian. Oil's slide towards a weekly loss deepened the strain, a setback for Middle Eastern economies reliant on crude revenues.

The weakness comes at a time of heightened uncertainty over the global oil supply. A White House official said India has halved its purchases of Russian oil, but Indian sources said no immediate reduction had been seen. U.S. President Donald Trump and Russian President Vladimir Putin have also agreed to meet in Hungary to discuss ending the war in Ukraine, a move that could reshape energy flows and, in turn, impact oil prices and Middle Eastern markets.

DIVERGENT PATHS India's equity benchmarks reversed early losses on Friday, pushing Nifty 50 to a one-year high as gains in Reliance Industries ahead of its results outweighed losses in Infosys and Wipro.

Banking and financials indexes in the country bucked global weakness and hit record highs, before key earnings from HDFC Bank and ICICI Bank. On the other hand, Chinese stocks dropped 1.3% and were set for the steepest weekly decline in 10 weeks due to investor caution over trade uncertainties and profit-taking in AI-linked shares.

The moves on Friday highlight how torn emerging markets investors remain between hopes of economic resilience and persistent uncertainty. While tariffs have so far proved less damaging than feared, prompting the International Monetary Fund to raise its outlook for global growth this week, sentiment has been buffeted by shifting headlines and fragile confidence.

Overall, an MSCI index of emerging market equities fell 1.4% and was on pace to end the week slightly lower. The equivalent currencies gauge dipped 0.2% and was set to end the week flat. Currencies, however, may see some strength in the coming weeks as the U.S. dollar weakens further.

"A sudden surge in scrutiny of U.S. regional banks is hitting equities and the dollar. It's hard to pick a bottom in the ongoing USD sell-off, which may well run a bit further from here," economists at ING wrote in a note. Gold, meanwhile, has surged past $4,300 an ounce to a record high for the fourth straight session. The surge in the traditional safe-haven asset signals lingering caution, with investors wary of lofty equity valuations despite the AI-driven rally.