Emerging Markets-EM stocks bounce as oil prices ease, AI stocks rally

The US dollar remained pinned near seven-week highs, weighing on emerging market currencies. The MSCI's index tracking EM FX .MIEM00000CUS was on track to log its biggest weekly decline since early June. Turkey's BIST-100 was on track for its worst weekly performance since March, as investors were spooked by concerns that redemption issues at some funds would trigger forced selling and spread liquidity stress across markets. Turkey's finance minister said on Friday that the liquidation of investment funds will not put pressure on Borsa Istanbul and that there is no broad systemic or structural risk. In South Africa, investors will be awaiting inflation data and the central bank's rate decision next week, where it is widely expected to hike rates after a surprise hold in July. The rand ZAR= firmed while the stocks index .JTOPI eased 0.1%. A dip in oil prices and a rally in AI-linked stocks pushed emerging market equities to a one-week high on Friday, while currencies were largely muted as investors assessed major central banks' hawkish stance this week. The MSCI's EM stocks index .MSCIEF rose 1.4%, lifted by AI-heavy equity bourses in Taiwan .TWII and Korea .KS11. Elsewhere, markets were mixed, with India's stock index .NSEI up 0.3%, while Turkish stocks .XU100 fell 1.7%. The Federal Reserve raised interest rates for the first time in three years on Wednesday and flagged more hikes in the coming months, indicating that the trade war, the energy shock from the US-Israeli war with Iran, and AI-related spending have fuelled inflationary pressures. However, global stocks have risen since the Fed's decision, as the central bank's commitment to rein in inflation reassured investors. "The Fed's unanimous 25bp hike and Chair Warsh's hawkish delivery have restored a credibility premium to US monetary policy that, counter-intuitively, is supportive for EM local assets," Societe Generale analysts said in a note. In Central and Eastern Europe, the Czech central bank (CNB) left its main repo rate unchanged at 3.75% on Thursday, as expected, extending last month's pause after hiking it in June, a first in four years. Policy makers signalled that further tightening was still on the table during the November meeting, but noted that August's 1.9% inflation was below the CNB's 2% target. The CNB outlook remains a mixed bag; four rate hikes are still priced in, and the yield curve saw only slight steepening. Looking ahead, we anticipate the CNB adopting a more hawkish stance in the coming weeks and months, said Frantisek Taborsky, EMEA FX & FI strategist at ING. The koruna EURCZK= was muted against the euro, while the equities benchmark .PX declined nearly 1%. Markets will also turn their attention to the central bank meeting in Hungary next week, when it is expected to keep its base rate on hold at 5.5% after three cuts in a row, a Reuters poll showed. On Friday, the forint EURHUF= slipped 0.8% to 363.62 a euro.

Emerging Markets-EM stocks bounce as oil prices ease, AI stocks rally

Turkey, South Africa and EM currencies

Emerging market stocks rise on lower oil and AI gains

Central Europe markets watch Czech and Hungarian policy

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