An index fund tracking Indian shares jumped ON Monday as a long-awaited trade deal with the US helped it buck a slump seen across risk assets. The $9.4 billion iShares MSCI India ETF gained the most since last May after US President Donald Trump said he would lower tariffs on Indian goods to 18% from 25%, following Prime Minister Narendra Modi’s agreement to halt purchases of Russian oil.
MSCI’s gauge for developing-nation equities, meanwhile, slid as much as 2.9%, the most since April, before trimming the decline as the global selloff moderated. South Korean stocks tumbled, with the Kospi index down 5.3%.
The slide followed Friday’s dramatic selloff in assets from global equities to precious metals, as Trump’s nomination of Kevin Warsh to lead the Federal Reserve boosted the dollar on expectations of a tougher stance on inflation and fewer rate cuts. The rout in gold and silver eased during Monday’s session. Crypto assets also rebounded.
MSCI’s companion gauge for currencies slipped about 0.4% on Monday, with the South Korean won among laggards. Latin American currencies outperformed, with the Colombian peso beating peers after the nation’s central bank delivered a 100-basis point rate hike on Friday. The greenback climbed after US ISM manufacturing data from January came in stronger than expected.
“It seems that in this environment in which the dollar is getting stronger, the EM position was less crowded, so the movement is not as violent as in metals or other assets, so the losses are not that dramatic,” said Marco Oviedo, senior strategist at XP Investimentos.
“Carry could also be relevant,” he added, citing the expectation Mexico policymakers hold rates unchanged later this week, and Brazil’s likely “gradual” pace of easing ahead.
What’s more, Morgan Stanley strategists said Trump’s nomination of Warsh does not spell the end of a yearlong rally in emerging-market currency and local bond markets. Investors should buy the dips in local markets because fundamentals remain solid, and monetary policy continues to serve as a key anchor, strategists including James Lord and Simon Waever wrote in a note.
The US Bureau of Labor Statistics won’t release the January jobs report as scheduled on Friday due to the partial government shutdown, a BLS spokesperson said Monday. The December Job Openings and Labor Turnover Survey, which was scheduled to be released Tuesday, will also be rescheduled.
In credit markets, Poland is planning a return to the Japanese bond market after two years away with a planned multi-tranche Samurai issue to fund its growing borrowing needs. Meanwhile, Argentina doesn’t plan to sell bonds on global debt markets while the government can access alternative funding sources at lower interest rates, Economy Minister Luis Caputo said on Monday.
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