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EM review: Geopolitical risks come to fore as rally loses steam

Mar 04 2019 09:29
Yumi Teso and Aline Oyamada

Emerging-market stocks and currencies trimmed their 2019 advance as geopolitical risks resurfaced and concern over US-China trade talks lingered.

The following is a roundup of emerging-markets news and highlights for the week ending March 3.

Asset Moves Weekly:

·       February MSCI EM stocks index -0.7% +0.1%

·       MSCI EM FX index -0.1% -0.5%

·       Bloomberg Barclays Global EM Local Currency bond index -0.02% -0.3%

Highlights:

US President Donald Trump said Saturday that the US dollar is too strong and took a swipe at Federal Reserve Chairman Jerome Powell as someone who "likes raising interest rates" US officials are preparing a final trade deal that Trump and his Chinese counterpart Xi Jinping could sign in weeks, according to people familiar with the matter.

Trump said the two sides were "getting very, very close" in trade talks.

Trade representative Robert Lighthizer took a more cautious tone Wednesday, telling lawmakers that a lot of work still needs to be done before any trade pact is signed, and that implementing it would be a tough task.

Powell said in testimony to the Senate that a healthy US economy has faced "crosscurrents and conflicting signals." His remarks showed no bias toward further interest-rate increases or cuts. Trump said he walked out of his second summit with Kim Jong Un after the two leaders failed to agree on a deal that would see Pyongyang give up much of its nuclear weapons programme in exchange for an easing of US sanctions.

Kim vowed to meet again with Trump to continue negotiations. The US economy expanded an annualised 2.6% in the fourth quarter, more than analysts had expected. An Indian Air Force pilot captured by Pakistan was released on Friday, offering the two countries a chance to de-escalate the worst military tensions in decades.

MSCI said it would expand the weighting of China-listed shares on benchmark indexes tracked by global investors.

Muhammadu Buhari won a second term as president of Nigeria with promises to revive the economy and tackle security threats including an Islamist insurgency.

Opposition leader Atiku Abubakar said his legal team to challenge the result of the election is in place.

Brazil’s new central bank president, Roberto Campos Neto, signalled policy continuity in his hearing at the Senate before he was confirmed for the role, maintaining the focus on inflation and indicating that he supported the current neutral policy stance.

The US is discussing with the International Monetary Fund and other institutions about providing financial assistance as well as official loan programs to Venezuela, the Financial Times reported. - Bloomberg

emerging markets  |  markets
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