Stocks go down when emerging market rates go up. Risk aversion stems from US-China tensions

0
3

“The focus will shift to how China responds. There has been very strong rhetoric from China, but there are no concrete details about what responses are possible, so we are factoring that in. is very difficult,” he is an FX analyst at InTouch Capital Markets. “So we’re kind of in wait-and-see mode right now.” Global sentiment was already pessimistic as Monday’s weakness in factory activity data for July in China, Europe and the US reinforced fears of a recession.

InTouch he said Matys But on the day, the Chinese yuan rose after hitting an 11-week low, while the Indian rupee continued its rally to a five-week high. “Price action shows how difficult it is for investors to price in risk.” The Hungarian Forint rose 1.0% as the euro fell. Tensions are mounting as the Biden administration debates whether to lift some of the tariffs on Chinese goods imposed under former President Donald Trump. The tariff war that began in 2018 has slowed global growth and disrupted supply chains. Emerging market stocks fell about 17% in 2018, while currencies fell about 4%.

Story Highlights

  • His MSCI index of emerging market stocks set for its worst session in three weeks, with China’s blue chip stocks down his 2% and Taiwan’s main index down his 1.6% to his two-week low. Shares of Apple supplier Taiwan Semiconductor Manufacturing Co fell 2.4%. Most benchmark equity indices in emerging markets in Europe, the Middle East and Africa fell between 0.2% and 1% western European stocks fell, as did US stock futures.

  • Rabobank global strategist Michael Every warned that volatility is likely to last much longer than this week as the trend toward safe haven currencies such as the dollar and yen head. The MSCI index of developing country currencies was flat after three days of gains. “Asian currencies will likely be the most vulnerable to risk aversion, to a lesser extent as central and eastern European currencies are not directly exposed [to Central American tensions],” he said.