Emerging Markets Hold Steady amid U.S. Inflation News
Tuesday’s financial markets saw relatively steady performances from most currencies in the emerging markets sector, as punters around the globe held their breath in anticipation of important data from USA about inflation indices. Concurrently, a sense of optimism flooded the equities market, mainly buoyed by the ongoing discussions between several nations and the United States in the arena of trade. This was largely influenced by the looming tariff deadline of August 1st, set forth by President Donald Trump. Trump’s recent indications of a willingness to engage in tariff-related discourse, following an array of threats dispensed to a variety of trade allies, was seen as positively influencing this development.
Mexico, for instance, was recently on the receiving end of a 17% tariff slapped on its tomato exports. This has prompted nations globally to expedite their negotiation efforts as they strive to meet the newly adjusted deadline of August 1. It is the market’s belief that these discussions could introduce softer tariffs, a notion that has been effective in uplifting investor sentiment to some extent.
This sentiment was corroborated by MSCI’s index for global emerging market stocks, which saw a 1% increase, bringing it to levels that hadn’t been witnessed since February 2022. This increase was recorded after the index documented declines over two consecutive instances or sessions. Poland and Romania’s regional stock markets, in particular, saw appreciable gains of 0.7% and 0.5% respectively.
In the Asian front, heavyweight stocks were not left behind, reporting a continuation of gains. Notably, the markets in both Indonesia and Hong Kong observed increases of 0.6% and 1.6% in their respective stocks. However, amidst these developments, President Trump did not hold back from exerting pressure on Russia. On Monday, he issued Russia a firm 50-day ultimatum requiring them to conclude the ongoing Ukraine war or anticipate imminent energy sanctions.
A leading Russian security officer, however, played down Trump’s ultimatum. As for the market response, the Russian rouble slipped slightly by 0.2% against the US dollar. Meanwhile, international bonds in Ukraine found themselves slightly less valuable, a development noted after a few of these bonds had reached a near five-week high in the preceding trading session.
The MSCI global emerging market currency index largely maintained its position, with no significant variations noted within the day. As investors cautiously awaited the US inflation report, major currency bets were largely absent. Emerging European currencies reported slight declines against the euro, but the most noticeable mandown was the Hungarian forint, with a dip of 0.5%.
The Polish zloty also recorded a marginal 0.1% depreciation after the revelation that the country’s consumer price index had reached 4.1% on an annual basis in June. In the African continent, the South African rand bucked the trend with an improvement of 0.5% against the US dollar, and a 0.7% gain was observed in its equity market.
On the flip side, S&P Global Ratings wasn’t generous with Senegal, as it lowered the long-term local and foreign currency sovereign credit ratings for the nation to ‘B-‘ from ‘B’. This decision was attributed to the country’s deteriorating budgetary performance and increasing fiscal needs. Simultaneously, Turkey’s markets reported no activity due to a public holiday.
In other emerging market news, Thailand’s equities experienced a significant surge, touching their highest level since May 30. Supporting this flourish was rumoured news that the country will soon name an advocate of robust monetary policy relaxation as the head of its central bank, effectively boosting the Thai baht.