Emerging market stocks hit a three-week high on Thursday, with tech making up much of that lift, while most developing world currencies were biding time ahead of keenly awaited U.S. inflation data.
U.S. inflation is seen at multi-decade highs, with data due at 1330 GMT (08:30 a.m ET) expected to cement the U.S. Federal Reserve’s hawkish stance. Markets have priced in four Fed rate hikes this year, with the first expected next month. Investors in riskier assets are bracing for a tough year with most other major central banks in the developed world also adopting tighter monetary policy stances.
“The Fed should be the bigger driver for EM markets in early 2022 rather than Omicron, with FOMC hikes in March, balance sheet run-off and higher U.S. yields now forecast,” said JPMorgan’s head of currencies, commodities and emerging markets research, Luis Oganes. “Higher U.S. real yields look set to keep pressure on EM currencies, which typically weaken into Fed hiking cycles.”
MSCI’s index of emerging shares climbed 0.7%, although gains were capped by losses in Chinese and Russian blue-chips as well losses in central and eastern Europe and Africa. China’s Alibaba rose almost 3% as Softbank said it had no plans to sell down its stake. China Evergrande Group jumped 5.4% after the chairman of the world’s most indebted property developer said it would resume construction and ruled out fire sales.
Emerging currencies were steady to positive against a tepid dollar. Russia’s rouble firmed 0.3% and has strengthened for nine out of the last eleven sessions, up nearly 8% since its late January trough. Shuttle diplomacy continued as the West tried to dissuade Moscow from invading Ukraine. The European Central Bank is preparing banks for a possible Russian-sponsored cyber attack as tensions mount.
Ahead of Russia’s central bank meeting on Friday, local inflation data on Wednesday underscored the need for another large interest rate hike. China’s yuan and Turkey’s lira were little changed, while South Africa’s rand rallied 0.3% ahead of President Cyril Ramaphosa’s state of the nation address at 1700 GMT. Commentary on basic income support and jobs were eyed, Citigroup strategists said.
The Polish zloty extended gains against the euro on hawkish central bank comments, while Hungary’s forint hit over four-month highs. Shares in emerging markets-focussed asset manager Ashmore dipped after it reported a 23% drop in pretax profit on outflows and a weaker investment performance. But the company was upbeat about the outlook for this year.
For GRAPHIC on emerging market FX performance in 2021, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2021, see https://tmsnrt.rs/2OusNdX For TOP NEWS across emerging markets
For CENTRAL EUROPE market report, see For TURKISH market report, see
For RUSSIAN market report, see
(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)
George is Digismak’s reported cum editor with 13 years of experience in Journalism