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Emerging-market currencies slump amid Middle East tensions and speculations over rate cuts: Emerging-market currencies tumbled on Thursday as escalating tensions in the Middle East drove demand for safer assets like the USD, Bloomberg reports. Adding to the strain, new data revealed that the US services sector expanded at its fastest pace since early 2023, raising expectations that the Federal Reserve may slow its rate cuts. Plus: President Joe Biden’s implication that Israel may hit Iranian oil infrastructure further unsettled markets.
The MSCI index tracking emerging-market currencies fell by 0.5% yesterday before paring losses. The key gauge for developing countries’ stocks also fell 1.3% as Hong Kong stocks fell after a two-week streak stimulated by a package of measures aimed at reviving the Chinese economy.
The risk: a slower pace of Fed rate cuts means slower rate cuts in EMs, and in turn, a harder time for EM currencies. US Federal Reserve Chair Jerome Powell already signaled recently that the Fed is in no hurry to cut rates.
On the bright side, both HSBC and Morgan Stanley expressed a positive outlook for China’s equities, with predictions of further gains. That is set to boost EM currencies, which have already been benefitting from a removal of downside risk in China’s economy, one portfolio manager said.
US labor data in focus: US labor market data expected tomorrow could provide more insight into the Fed’s upcoming rate cut trajectory.
MARKETS THIS MORNING-
Asian markets are mixed, tracking Wall Street losses amid the escalation of regional tensions. Hong Kong’s Hang Seng slipped 1.26%, while Japan’s Nikkei, Topix, and South Korea’s Kospi are up marginally. Meanwhile, Wall Street futures are trading flat as traders await labor market data tomorrow.
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ADX |
9,214 |
-1.0% (YTD: -3.8%) |
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DFM |
4,398 |
-1.9% (YTD: +8.3%) |
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Nasdaq Dubai UAE20 |
3721 |
-1.8% (YTD: -3.1%) |
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USD : AED CBUAE |
Buy 3.67 |
Sell 3.67 |
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EIBOR |
4.7% o/n |
4.0% 1 yr |
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TASI |
11,958 |
-0.7% (YTD: -9.9%) |
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EGX30 |
31,721 |
+1.2% (YTD: +27.4%) |
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S&P 500 |
5,700 |
-0.1% (YTD: +19.5%) |
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FTSE 100 |
8,283 |
-0.1% (YTD: +7.1%) |
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Euro Stoxx 50 |
4,921 |
-0.9% (YTD: 8.8%) |
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Brent crude |
USD 77.62 |
+5.03% |
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Natural gas (Nymex) |
USD 2.97 |
-0.1% |
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Gold |
USD 2,675 |
-0.2% |
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BTC |
USD 60,753 |
+0.4% (YTD: +43.75%) |
THE CLOSING BELL-
The DFM fell 0.8% yesterday on turnover of AED 358.1 mn. The index is up 9.4% YTD.
In the green: National International Holding Company (+15.0%), Emirates REIT (+9.0%) and Parkin Company (+2.1%).
In the red: National General Ins. Company (-10.0%), Agility The Public Warehousing Company (-4.9%) and Emirates Reem Investments Company (-4.0%).
Over on the ADX, the index fell 1.0% on turnover of AED 1.89 bn. Meanwhile, Nasdaq Dubai closed down 1.8%.
CORPORATE ACTIONS-
Parkin will distribute AED 198.7 mn in interim cash dividends for 1H 2024, equivalent to 6.63 fils per share, representing 100% of its net income during the six-month period, according to a DFM disclosure (pdf).
