BENGALURU, India, 9th August, 2024 (WAM) -- Emerging market stocks and currencies rose broadly on Friday, with indexes tracking both set for weekly gains after U.S. employment data soothed nerves about a recession in the world's largest economy and helped risk assets regain some ground.
Reuters reported that MSCI's gauge of global emerging market equities rose 1.6 percent, set to edge up 0.2 percent on the week, its first weekly rise in four if gains hold.
Bourses in Asia, notably Taiwan and South Korea , led equity gains, though the Kospi index is on pace for its worst weekly decline since September 2022 after a selloff in global technology and semiconductor stocks.
The broader EM currency index rose 0.4 percent, on track to close the week up 0.7 percent, which would be its best week since December.
Hopes on Fed rate cut
Friday closes an incredibly turbulent week, as global markets plunged after poor U.S. economic data increased worries about slowing global growth. That caused a rush for the safe-haven Japanese yen, which in turn caused a massive unwinding of yen-funded carry trades.
However throughout the week, comments from Japan's deputy governor helped stem the yen's rise, while Thursday's larger-than-expected fall in U.S. jobless claims helped calm nerves about a recession.
Investors see a slightly higher - 54.5 percent - chance of a 50 basis point cut from the Fed by September, as per CME's FedWatch. Lower interest rates in the U.S. typically lift the attractiveness of high yielding emerging market assets.
Indeed, emerging market equities have seen inflows of US$2.3 billion over the past 10 weeks, according to data from Bank of America Global Research. However, EM debt has seen outflows for the past two weeks.
Forex
The euro lost about 0.2 percent each against the Czech crown and Hungarian forint.
Polish stocks led equity gains in emerging Europe, rising 0.6 percent. On the other hand, stocks in Turkey lost 0.7 percent after two sessions of gains.
The Israeli shekel strengthened against the dollar for a third day, with the greenback losing 1.2 percent against the currency.
Leaders of the United States, Egypt and Qatar have pushed for urgent talks between Israel and Hamas on 15th August for negotiations in order to finalise a Gaza ceasefire and hostage release deal.
Elsewhere, central bank data showed nervous investors are avoiding long-dated Kenyan Treasury bills and bonds.