EMERGING MARKETS – Stocks rise 1% as falling commodity prices ease inflation fears
* Shares up 1.2%, FX margin up 0.1%
* Turkish manufacturing confidence in June down to 106.4 points from 109.4 in May
* Emerging market debt sees outflows of $2.8 billion in the week to Wednesday – BofA
By Anisha Sircar
June 24 (Reuters) – Emerging market stocks rose more than 1% on Friday as a drop in commodity prices eased investor fears of stubborn inflation, while a weaker U.S. dollar boosted most regional currencies at the end of a turbulent week.
The MSCI Emerging Markets Equity Indicator jumped 1.2% as falling metal and crude prices boosted risk sentiment, with energy and food the main drivers of inflation.
Still, the index was on track for its worst quarter since the start of 2020 during a COVID-induced rout.
Emerging market currencies including the South African rand, Chinese yuan and Mexican peso rose 0.1% to 0.3% as the US dollar weakened against most of its peers.
Both indexes have been rocked in recent weeks on worries about the outlook for emerging market assets and fears that aggressive rate hike cycles could hurt economic growth.
“The macroeconomic backdrop (around a global recession) creates additional policy challenges for emerging markets, where the tightening is already well underway, but inflationary pressures are not easing yet,” said Natalia Gurushina, economist at VanEck EM Fixed. Income.
“But one emerging market region that can afford a gradual policy normalization is Emerging Market Asia – regional headline inflation is much closer to official targets than in EMEA and LATAM.”
Most stocks and currencies in Asia firmed, although the Indonesian rupiah and Philippine peso fell 0.1% and 0.6%, respectively, a day after the Bank of Indonesia left rates unchanged. to a record high and the central bank of the Philippines announced a modest rate hike.
The Turkish lira remained stable a day after the country’s central bank maintained its key rate for the sixth consecutive month. Business confidence among Turkish manufacturers fell to 106.4 points in June from 109.4 points last month, central bank data showed.
“Turkey’s policy rate and inflation differential are by far the highest among major economies – USDTRY is hitting a glass ceiling of around 17.36, exactly twice as high as there is one year and close to December shock highs,” said Alex Kuptsikevich. , senior market analyst at FxPro.
“The national currency should act as a clearing mechanism, but it cannot do so to its full extent due to strict capital controls, which only further restrict economic growth, preventing it from restarting the economic engine. “
Weekly data from Bank of America showed emerging market debt funds lost $2.8 billion in an 11th consecutive week of outflows in the week ending Wednesday, while regional equity funds saw $300 million leave.
For 2022 Emerging Markets FX performance chart see http://tmsnrt.rs/2egbfVh For 2022 MSCI Emerging Market Index performance chart see https://tmsnrt.rs/2egbfVh
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For the RUSSIAN market report, see (Reporting by Anisha Sircar in Bengaluru; Editing by Sherry Jacob-Phillips)