Bonds

EMERGING MARKETS-Trade talks, hopes for rate cuts boost stocks

Credit: REUTERS/Aly Song

Emerging-market stocks rallied for a third straight day and currencies gained on Thursday, amid signs of progress in U.S-China trade talks and signals by major central banks that they will soon loosen monetary policy.

By Sruthi Shankar

June 20 (Reuters) - Emerging-market stocks rallied for a third straight day and currencies gained on Thursday, amid signs of progress in U.S-China trade talks and signals by major central banks that they will soon loosen monetary policy.

The MSCI index of developing-world stocks .MSCIEF jumped 1.3% to its highest since early May. China's blue-chip index .CSI300 and Shanghai Composite index .SSEC closed at eight-week highs.

Hong Kong-listed stocks .HSI were up over 1%. Indian, .NSEI, .BSESN, Russia, .IMOEX, South African .JTOPI and Turkish .XU100. shares also rose.

The gains came on news that Beijing and Washington officials would resume negotiations after talks broke down last month.

An index of emerging-market currencies .MIEM00000CUS surged about 0.9%, on track for its biggest one-day percentage gain since December 2017, as the U.S. dollar weakened after the Federal Reserve joined the European Central Bank in signalling it was likely to ease its monetary policy .

"The EM market reaction to dovish Fed and ECB appears to be apparent: lower local yields and technical rebound in local currencies, although we believe local currency appreciation would be a transient knee-jerk reaction," Societe Generale analyst Marek Drimal wrote in a note.

Investors are betting the Fed will cut interest rates as early as next month and at least once more in 2019. Capital has flowed into emerging-market assets this month on expectations rates will fall worldwide, after trade worries drove a selloff in May.

The Indonesian rupiah IDR= jumped 0.7% after its central bank said it was monitoring global financial conditions to assess room for a rate cut, but left key interest rates unchanged.

Brazil's central bank also kept borrowing costs at a record low on Wednesday, as expected, but held back from signalling looser policy because of doubts on economic reforms.

The Thai baht THB= and the South Korean won KRW= were the biggest movers, gaining more than 0.9% each.

The South African rand ZAR= rose 0.6% to a five-week high before President Cyril Ramaphosa's State of the Nation address later in the day .

Mexico's peso MXN= edged higher after the country became the first to ratify the United States-Mexico-Canada Agreement agreed late last year.

Emerging-market dollar bonds also rallied, with Russia's 2047 dollar bond RU000A0JXU22=TE rising 2.9 cents in the dollar to a record high, according to Tradeweb data.

South Africa's 2044 dollar bond US836205AS32=TE added 3 cents in the dollar, reaching its highest point since January 2018.

For GRAPHIC on emerging market FX performance 2019, see http://tmsnrt.rs/2egbfVh

For GRAPHIC on MSCI emerging index performance 2019, see https://tmsnrt.rs/2OusNdX

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see CEE/

For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB

(Reporting by Sruthi Shankar in Bengaluru and Tom Arnold in London; editing by Larry King)

((sruthi.shankar@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 6749 6328; Reuters Messaging: sruthi.shankar.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Latest Bonds Videos

#TradeTalks: Challenges Facing Bond Investors

Jill Malandrino was joined by Dominick DeAlto, Chief Investment Officer, Fixed Income for BNP Paribas Asset Management, to discuss the challenges bond investors are facing.

1 day ago

Reuters

Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

Learn More