Emerging-Market Gain Wanes on Trade as Moody’s Cuts Turkey Banks

LAGOS (Capital Markets in Africa) – The rally in emerging markets lost momentum Tuesday as hopes for a U.S.-China trade breakthrough faded. The lira tumbled as Moody’s Investors Service downgraded several Turkish banks.

Stocks pared gains, and the Vanguard FTSE Emerging Markets exchange-traded fund halted a back-to-back surge on speculation that the Trump administration is putting trade negotiations with China on the back burner while focusing first on resolving issues in North America. Every major Latin American currency retreated after gains that followed the U.S. trade pact with Mexico. In addition to the Moody’s downgrade, the absence of signals from Turkish policy makers of reforms to address economic woes put pressure on the lira.

Investors sifted through the latest news on global trade after U.S. Commerce Secretary Wilbur Ross told Fox Business News that President Donald Trump’s position is that now isn’t the best time for negotiations with China, denting expectations of a fast resolution. Gains in risk assets also remained fragile amid concern over further sanctions to Russia and Turkey as well as uncertainties over the upcoming Brazilian presidential election.

“The positive news out of Mexico quickly faded as worries about Turkey and China-U.S. trade resurfaced,” said Shahzad Hasan, an emerging-market debt manager at Allianz in London. “The risk factors have not changed.”

Ashok Shah, investment director at London & Capital, discusses where he’s finding opportunity in markets.

Source: Bloomberg Business News