Emerging market stocks touched a two month low on Monday as risk appetite was hit by uncertainty surrounding political turmoil in the United States amid fears of a slowdown in the global economy.

The MSCI index of emerging market shares fell to its lowest since Oct. 31, down 0.4 per cent in holiday-thinned trade, with South Korean and Hong Kong stocks leading losses in Asia.

Sentiment soured as Washington said over the weekend that the partial U.S. government shutdown could continue into January, and as sources said U.S. President Donald Trump had privately discussed the possibility of firing Federal Reserve Chairman Jerome Powell.

Treasury Secretary Steven Mnuchin sought to calm investors, tweeting that Trump had told him that he never suggested dismissing the Fed chief.

“U.S. economic and policy uncertainty in the wake of the weekend headlines suggests risk will continue to struggle on Christmas eve,” said Stephen Innes, head of Asia-Pacific trading at OANDA.

But, losses on the broader index were capped by mainland China stocks closing higher on Beijing’s promise to step up support for the economy next year amid a lingering trade war with the United States.

The Shanghai composite climbed 0.4 per cent, while Chinese blue-chips broke a six-day losing streak to rise 0.3 per cent.

Stocks in Turkey and South African also perked up, while Russian stocks lost 0.7 per cent, declining for the ninth session in 11.

Most emerging market currencies firmed as the dollar weakened with investors turning to the Japanese yen and the Swiss franc for safety.

The Indian rupee and the South Korean won led gains among Asian currencies, up 0.3 per cent each.

The Turkish lira tacked up 0.3 per cent, while South Africa’s rand rose for the first time in four days, up 0.7 per cent.

Russia’s rouble recovered from 14-week lows hit last week and rose 1 percent tracking a rise in oil prices.

Most Eastern European currencies made marginal moves against a stronger euro. (Reuters/NAN)