Emerging Markets Stocks Rally as Trade Talks Boost Sentiment
The gauge gained 0.5%, finishing the day at the highest level since President Donald Trump presented his reciprocal tariffs on April 2. The MSCI Index leaped 2.7% last week.
'Positive comments by US Treasury Secretary Scott Bessent about trade deals coming from the US is offering EM assets support,' said Elias Haddad, a strategist at Brown Brothers Harriman & Co.
Monday's gains also put the EM stocks index above its 200-day moving average. If the gauge ends April with an advance, that would mark a gain in each of the first four months of a year — a feat last achieved in 2019. Earnings estimates for the gauge have risen 0.8% this month, the most since August.
For Michael Brown, a senior research strategist at Pepperstone Group Ltd, the recent EM rally has been largely driven by the broad 'sell America' trade amid policy uncertainty from Trump. Those countries that reach trade deals with the US — which result in a permanent lowering of tariffs — are likely to outperform peers.
Meanwhile, in the foreign exchange market currencies were mostly up. The MSCI currency index rose just 0.08% amid a sinking dollar, which fell over 0.5% during the trading session. The South African rand and the Hungarian forint led the gains in the emerging basket, while the Chilean peso lagged its peers, down as much as 1.1%.
Earlier, assets in Colombia dropped after the International Monetary Fund paused access to an $8.1 billion flexible credit line. The country's peso plunged as much as 0.9% while its dollar bonds fell across the curve, with notes maturing in 2035 down 1 cent to about 100 cents on the dollar. The peso closed little changed.
Hopes have grown that the worst of the US tariff threat may be passing after Treasury Secretary Scott Bessent said last week that the US and South Korea could reach an 'agreement of understanding' on trade as soon as this week. Bessent said Sunday that negotiations with some trading partners 'are moving along very well, especially with the Asian countries.'
Traders this week will also be watching for key US data including growth and a gauge of inflation to assess if Trump's trade war has begun to affect the economy. Meanwhile, Chinese officials Monday reiterated a pledge to aid growth ahead of the release of factory activity data later this week.
'Overall we expect US data to show signs of a cooling labor market, but not falling off a cliff,' said Dan Pan, an economist at Standard Chartered Bank.
On Monday, Angola's bonds rallied for some of the biggest gains in emerging markets. The country held talks with the International Monetary Fund last week about possible financing packages, its finance minister said, after trade wars and a slump in energy prices effectively shut the oil producer out of international bond markets.
Bulgaria tapped international markets, selling Eurobonds for the first time this year. The country is issuing a total of €4 billion ($4.5 billion) in bonds, its biggest ever haul of euro-denominated debt in a single day, to fund its growing budget deficit in preparation for euro adoption.
--With assistance from Michael G. Wilson.
More stories like this are available on bloomberg.com
First Published: 29 Apr 2025, 05:39 AM IST
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