What US payrolls may mean for frail emerging markets

Is bad news actually bad news this year?
Is bad news actually bad news this year?

Any upbeat surprise in Friday's closely-watched U.S. non-farm payrolls report could bring some relief to battered emerging markets, some analysts say.

That's not what you might expect given that emerging markets from Turkey to Brazil and India have been hurt as the U.S. Federal Reserve starts to unwind its monetary stimulus in light of a brighter growth outlook.

(Read more: A weak jobs report really could be a snow job)

"Ordinarily better jobs data would have led to a sell-off in emerging markets, which fear the taper, but this has been turned a bit on its head recently as weak U.S. numbers have added to fears that taper could take place in a world where the growth outlook is not that fantastic," said Vishnu Varathan, market economist at Mizuho Corporate Bank in Singapore.

"So any upside surprise today would be positive for emerging markets since they would find some consolation in that there would be some justification in taper if the U.S. is growing," he added.

Job seekers wait to talk to recruiters and fill out applications at a job fair in New York.
Victor J. Blue | Bloomberg | Getty Images

Economists polled by Reuters expect the U.S. economy generated 185,000 new jobs in January compared with 74,000 in December. The unemployment rate is seen steady at 6.7 percent.

A much weaker-than-expected survey on U.S. manufacturing activity earlier this week sparked sharp selling in both developed and emerging markets as worries about the outlook for growth in the world's biggest economy took hold.

(Read more: Manufacturing slows sharply in January)

"The mood of the market has changed since last year. Last year, when we had a correction in June that helped delay a tapering by the Fed," Eddie Tam, CEO at Central Asset Investments in Hong Kong told CNBC Asia's "Cash Flow."

"But this time if the [payrolls] numbers are bad we don't expect a slowdown in the pace of tapering. So unlike last year when bad news was interpreted as good news, this year bad news is bad news and we are fortunate if good news is not interpreted as bad news," he added.

All about the economy

Asia to escape emerging market chaos: ING
Asia to escape emerging market chaos: ING

In short, analysts say while a scaling back of Fed stimulus is now widely expected, a slowdown in the U.S. economy, on which many developing countries depend upon for trade, is not.

"You had a good fourth quarter GDP [gross domestic product] number and expectations are that growth will accelerate in 2014, so a couple of bad payrolls numbers and people start shaving that 2014 growth forecast," Tim Condon, head of research for Asia and ING Financial Markets said, referring to recent data showing the U.S. GDP grew at a 3.2 percent annual rate in the final quarter of 2013.

(Read more: India and Indonesia: Now so bad after all?)

"When growth worries are paramount you want to be a little bit distant from emerging markets, which explains the move in emerging-market equities this week," he added.

And while a degree of calm has returned to financial markets, emerging markets in particular remain sensitive to U.S. economic data, analysts say.

The MSCI Emerging Markets Index stood at around 932 points on Friday, two percent above a five-month low hit earlier in the week.

— By CNBC.Com's Dhara Ranasinghe; Follow her on Twitter @DharaCNBC