(Bloomberg) — Emerging-market stocks hit a fresh record high and currencies edged higher as investor focus shifted away from geopolitical risks posed by the US intervention in Venezuela and bullish sentiment around the global asset class strengthened.
MSCI Inc.’s benchmark EM equity index rose 1.1%, with Chinese stocks climbing to multi-year highs. A similar gauge tracking EM currencies edged higher on Tuesday even as the dollar gained. In fixed income, a gauge of emerging-market bond risk fell to the lowest in 13 years as of Monday.
“The benefits to the dollar from the Venezuelan events lasted half a day, with focus shifting back to data and equities shrugging off geopolitical risk,” ING Bank NV analyst Francesco Pesole wrote in a note Tuesday.
After Monday’s unexpected drop in the December ISM manufacturing gauge in the US, investors are waiting for more data that could help shape the Federal Reserve’s interest rate outlook. Fed Governor Stephen Miran said Tuesday the US central bank will need to cut interest rates by more than a percentage point in 2026.
Still, “the more important drivers of perceptions of the Fed outlook will come from the data, especially Friday’s employment report, where traders expect there to be little distortion from the government shutdown,” said Thierry Wizman, global FX & rates strategist at Macquarie Group.
The Chilean peso led gains among peers as copper prices extended rallies. President-elect José Antonio Kast also told business executives that he will nominate Jorge Quiroz as finance minister.
Prices on Venezuela’s bonds soared Monday with a group of the country’s longtime creditors huddling to discuss how the US ouster of President Nicolas Maduro will affect their ability to recoup some of their investment.
On emerging markets as a whole, bond investors have turned the most optimistic in 13 years amid a rally driven by greater confidence in fiscal discipline and more money shifting away from the US.
“The thesis for emerging markets is in my view stronger than ever,” Raymond Sagayam, managing partner at Banque Pictet & Cie SA, said in an interview on Bloomberg Television. Sagayam cited valuations, room for central banks to cut interest rates, and involvement in the AI value chain among the reasons for the bullish outlook.
–With assistance from Paul Dobson and Srinivasan Sivabalan.
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