Even though Powell warned it is premature to debate rate cuts, investors added to bullish positions in risky assets on the view that the Fed may start to ease monetary policy as soon
as May.
Currencies from Latin America led the rally, bolstered by the drop in Treasury yields and stronger-than-expected PMI manufacturing numbers out of China, which boosted commodity prices. Copper, Chile’s largest export, hit the highest since Aug. 3. The MSCI emerging-market equity gauge was little changed as of 11:45 am in New York, after falling as much as 0.3%.
“The reaction to Powell’s comments sided more with the camp within the Fed that believes the streak of rate hikes is indeed over,” said Juan Perez, director of trading at Monex USA. At the same time, “emerging markets that are far away from conflict in the Middle East — such as Brazil, Colombia and Mexico — look to be more valuable as winter approaches and their energy resources become even more important.”
Declines in Asian currencies earlier in the day were driven more by the US dollar recouping some of its losses and profit- taking rather than a change of sentiment on emerging markets, according to Generali Investments’ Guillaume Tresca.
Across Latin America, for example, fundamental factors like falling inflation, stable commodity price, and good macroeconomic management are enough to support going long on the region’s currencies, according to Bertrand Delgado, a strategist with Societe Generale.
Among stock markets, shares of Turkish lenders jumped to the highest level in seven weeks after S&P Global Ratings raised Turkey’s credit outlook to positive, citing changes in monetary policy.
In Russia, President Vladimir Putin cited economic and national security threats for a decision to transfer rights to
managing St. Petersburg’s main airport to a new Russian entity, seizing stakes owned by foreign shareholders including the Qatar wealth fund. The decision marks a departure from previous policies under which only assets belonging to so-called “unfriendly nations” were to be targeted in retaliation for measures taken against Russia since its invasion of Ukraine.
Sri Lanka’s international bonds fell as the nation’s lenders lashed out against the lack of details about the government’s deal with official creditors. The country’s dollar notes due in 2025 shed as much as 0.55 cents on the dollar during US trading hours.
S&P is expected to publish an updated view on Poland’s credit rating after markets close.
