Stocks Stop at One-Month Highs; Romanian c.bank sees rates rise

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Emerging market stocks and currencies stalled on Tuesday as fading hopes that China would ease COVID-19 restrictions gave way to jitters ahead of risky events in the United States, while the the Romanian leu was considering a probable rise in interest rates.

The MSCI index of emerging markets stocks hit new month-on-month highs before paring gains to trade little.

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After a stellar rally that saw Chinese blue chips gain 7.7% and Hong Kong’s benchmark 13% over the past five sessions, an increase in the number of COVID infections and official statements that the restrictions would remain in place prompted investors to take profits.

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But gains in South Korea, Taiwan, Hungary and Turkey helped limit losses.

The broader index of emerging market stocks is down nearly 30% this year amid concerns about a recession as Chinese growth slows and major central banks continue to tighten monetary policy.

“We are emerging equity neutral due to slowing global growth,” said a note from BlackRock’s Investment Institute.

Currencies were mixed, with the Chinese yuan slipping 0.4%, offsetting gains in other Asian units. The South African rand and Turkish lira lost 0.2% and 0.9% respectively against a rising dollar.

The dollar will focus this week on the US midterm elections where a deadlock in Congress is expected. On Thursday, October inflation data will be watched for monetary policy bets.

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In Central Europe, the Romanian leu last traded at 4.88 per euro. The central bank was seen raising the key rate by 75 basis points to 7% as inflation is expected to climb to 16.0% by the end of the year, above the current forecast for the central bank by 13.9%. The decision is expected at 13:00 GMT.

ING strategists expect a smaller 50 basis point hike and see chances of another 25 basis point hike in January.

“More important than the rate hike itself will be any hint of a change in the strict liquidity management policy. We see little to no chance of that changing at this time,” said Frantisek Taborsky, EMEA strategist FX & FI at ING.

In Hungary, the government could decide within days on a new ceiling on food prices to curb inflation, which could peak around 25% by the end of the year, the minister told Inforadio on Monday. of Marton Nagy Development.

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The forint remained close to seven-week highs, last trading at 399.58 per euro.

In Russia, the central bank has said there is no need to ease capital controls for now, as it supports the ruble. The currency was at 61 to the dollar in Moscow trading. 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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