Stocks jump over 1% on bets of smaller Fed hikes


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Emerging market stocks jumped on Friday to their highest in more than six months, as hopes for smaller interest rate hikes from the U.S. Federal Reserve lifted sentiment already buoyed by some easing in recession worries.

Data on Thursday showing cooling U.S. inflation fed bets that the central bank could opt for a 25-basis point hike at its next meeting after having delivered more than 400 bps of increases last year.

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MSCI’s index of emerging market stocks rose 1.2% and was on course for its best week in two months as it stayed on course to mark its ninth straight session of gains.

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As the dollar hovered at its June low, developing world currencies scaled seven-month highs, with China’s yuan rising 0.4%, while Indonesia’s rupiah jumped 1%.

“The market is likely to successfully ignore any future hawkish comments from Fed members, if they were not going to change their views,” said Commerzbank FX analyst You-Na Park-Heger.

Along with China’s border reopening and broad easing of COVID-19 curbs, concerns have eased about the severity of a potential economic downturn that economists have predicted for the year.

Caution remained however, as the peak of China’s COVID-19 wave is expected to last up to three months, according to a top Chinese epidemiologist.

Infections are expected to surge as hundreds of millions travel to their home towns for the Lunar New Year holidays, which officially start from Jan. 21.

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Data on Friday showed China’s exports shrank sharply in December, highlighting risks to the country’s economic recovery. But a more modest decline in imports reinforced views that domestic demand will slowly recover in coming months.

“With growth outside of China still slowing, (China’s) exports may continue to contract until the middle of the year,” said economists at Capital Economics.

Gains in South Africa’s rand were limited by worries about regular power cuts weighing on the economic growth of Africa’s most industrialized nation.

Investors will now look for more clues on the government’s plans for struggling power utility Eskom from the budget presentation next month.

This week, fund flows into emerging market bond funds were the largest since April 2022 at $1.5 billion, according to JPMorgan data.

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Most central European currencies gained against the euro. Data showed the Hungarian central bank’s tax-adjusted core inflation gauge rose to an annual 24.7% in December, while Romania’s consumer price inflation last month fell to 16.37% on the year, below expectations. For GRAPHIC on emerging market FX performance in 2023, see For GRAPHIC on MSCI emerging index performance in 2023, see

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For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see (Reporting by Susan Mathew in Bengaluru; Editing by Subhranshu Sahu)



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