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Emerging market assets recorded modest gains ahead of an anticipated U.S. Federal Reserve rate cut, with MSCI emerging market stocks rising 0.33% and currencies climbing 0.1%. Ukraine's approval to swap USD 2.6 billion in growth-linked warrants for new bonds eased a long-standing market overhang. European and Asian markets reacted to political developments, inflation data, and trade negotiations. China's real estate shares surged 5.9% amid weak domestic demand and calls for additional policy support, while markets in South Korea and Indonesia monitored currency stability and ongoing U.S. trade discussions.
Emerging market assets rose slightly as investors prepared for a likely interest rate cut by the U.S. Federal Reserve. MSCI's emerging market stocks index increased by 0.33%, while the currencies index gained 0.1%, recovering from losses in the previous session. Investors are watching closely for Fed Chair Jerome Powell's comments on rate policy for 2026, as expectations for further cuts have already influenced markets. Advertisement
Analysts highlighted that much of the expected easing is already priced in. Chris Turner, global head of markets at ING, noted it could be difficult to interpret the Fed's communication as dovish, and projections for two additional rate cuts next year could be uncertain.
Geopolitical developments, especially in Ukraine, added another layer of attention. President Volodymyr Zelenskiy is preparing a proposal for the U.S. to help resolve the ongoing war with Russia. Ukraine recently secured creditor support for a plan to swap USD 2.6 billion of growth-linked warrants for a new class of bonds, ending a prolonged stalemate. Tradeweb data showed the price of the warrants rose 0.7 cents, reaching a four-year high. A breakthrough in these negotiations could ease a major overhang on global equity markets.
In Europe, both economic and political events influenced markets. The Hungarian forint weakened 0.4% against the euro after Hungary's Prime Minister Viktor Orban and former U.S. President Donald Trump failed to agree on a proposed USD 20 billion financial support package, though discussions on alternative cooperation are expected to continue. Czech equities remained mostly unchanged after hitting a record high, following the appointment of Andrej Babis as prime minister. November data showed Czech consumer prices rose 2.1% year-over-year, slower than in October, while central bankers urged caution on rate cuts amid ongoing inflation risks.
China's real estate sector attracted attention after shares jumped 5.9%. Annual consumer inflation reached a 21-month high in November, but weak domestic demand has increased calls for additional policy support. Analysts said targeted measures could provide relief to the struggling property market and help stabilize economic growth.
Elsewhere in Asia, South Korea's central bank emphasized the need to stabilize the won, which remained largely steady against the U.S. dollar. Indonesian stocks rose 0.2%, while the rupiah fell 0.1%. Trade negotiations with the U.S. continue after concerns emerged that the July trade agreement could face challenges, according to Indonesia's coordinating ministry for economic affairs.
Source Reuters
5th Jun, 2025
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