On Wednesday, September 11, 2024, most emerging market assets showed little movement as investors waited for key U.S. inflation data. The cautious mood was influenced by concerns over potential U.S. economic slowdowns and continued uncertainty in China. Investors kept an eye on a bond sale in Nigeria and a significant vote in Mexico’s Senate.
According to the MSCI index, which tracks emerging market currencies, there was a slight 0.1% rise, while the U.S. dollar index dipped by 0.2%. Meanwhile, the stock index tracking emerging markets saw a 0.3% decline, marking its lowest level in over a month. This could mean that if the current trend holds, it would be the first time since January that the index would drop by more than 3% in a single month.
Much of the market’s movement hinges on the upcoming U.S. inflation report for August. Investors are concerned that the data could impact the Federal Reserve’s monetary policy, which will be decided next week. Many are expecting a 25 basis point interest rate cut, which could influence global markets, especially in emerging economies.
In the backdrop, U.S. economic growth concerns, combined with China’s own economic slowdown, have dampened investor sentiment. The uncertainty is reflected in the weak performance of emerging markets, where the main stock index continues to struggle.
Another factor impacting markets is the outcome of the recent U.S. presidential debate between Democrat Kamala Harris and Republican Donald Trump. Betting platforms have shown a slight swing in favor of Harris, who is seen as having a less inflationary economic policy compared to Trump. Analysts at ING bank noted that this shift in political favor could have a positive impact on currencies tied to protectionist and geopolitical concerns.
In Africa, Nigeria made headlines by raising $900 million through its first-ever domestic dollar bond sale. The country’s naira fell by 0.8% against the euro. Additionally, yields on Nigerian dollar bonds maturing in 2029 rose by 13 basis points. The sale is a critical moment for Nigeria as it seeks to secure more stable sources of income amidst ongoing economic challenges.
In Latin America, Mexico’s peso gained 0.7% after a significant loss in the previous trading session, largely driven by weak oil prices. Mexico is one of the largest oil exporters in the region, and changes in crude prices often directly impact the peso’s performance. A key event in the country’s Senate also drew attention, as lawmakers approved a controversial judicial reform that would allow judges to be elected by popular vote. Critics have warned that this could undermine the rule of law and create instability in Mexico’s legal system.
Elsewhere, Ukraine’s currency, the hryvnia, remained steady after the International Monetary Fund (IMF) announced a preliminary agreement that would provide the war-torn country with $1.1 billion in financial assistance.
In central and eastern Europe, Romania’s leu showed little movement after it was revealed that the country’s inflation rate dropped to 5.1% in August. Hungary’s forint, however, saw a slight increase of 0.1% ahead of the release of minutes from the central bank’s August monetary policy meeting.
Lastly, Sri Lanka saw a decrease in yields on its 2025 bonds by 360 basis points, following a recent spike ahead of an upcoming national election. This marks some easing in investor concerns as the country approaches its election period.
Most emerging market stocks and currencies remained relatively quiet as investors waited for more concrete economic data from the U.S. and monitored political events around the globe.
