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EMERGING MARKETS-Currencies, stocks rise as fear ebbs of aggressive Fed rate hikes

EMERGING MARKETS-Currencies, stocks rise as fear ebbs of aggressive Fed rate hikes

Reuters · 07/28/2022 08:24
EMERGING MARKETS-Currencies, stocks rise as fear ebbs of aggressive Fed rate hikes

China drops mention of GDP growth target

Turkish cenbank hikes end-2022 inflation view to 60%

Hungary central bank raises 1-wk deposit rate by 100 bps

Chinese yuan at one-week high; dollar at 3-week low

Adds details on China, updates prices; replaces graphic; adds comment

By Anisha Sircar

- Currencies and stocks in emerging markets bounced on Thursday after the U.S. Federal Reserve struck a less hawkish tone than expected, while China's yuan was little changed after the country dropped mention of its GDP growth target at a key Politburo meeting.

Stocks .MSCIEF jumped 0.6% amid a broad risk-on mood, while currencies .MIEM00000CUS firmed 0.2%.

China will try hard to achieve the best possible results for the economy this year, state media said after a high-level meeting of the ruling Communist Party, dropping previous calls that it will strive to meet its 2022 growth target.

In the second half, China should "maintain economic operations within a reasonable range," Xinhua agency reported.

China's yuan CNY= trimmed some losses to firm 0.2% at 6.75 per dollar after earlier hitting a one-week high of 6.74.

"The 5.5% growth target has been de facto abandoned... Our interpretation of 'reasonable range' growth is associated with employment ( job creation, unemployment rate) and inflation targets," said JPMorgan researchers in a .

Meanwhile, struggling developer Evergrande Group EGRNY is selling its Hong Kong headquarters via a tendering process that ended Thursday, a source said, and local developer CK Asset CHKGF confirmed it has bid for it.

The battered bond market has just started to show signs of improvement in recent days as investors sense support is being pieced together.

China will help property developers by issuing 1 trillion yuan ($148.2 billion) in loans for stalled developments as it tries to relieve pressure on the economy, according to the Financial Times.

Meanwhile, on Wednesday, in a widely anticipated move, the Fed lifted rates by 75 basis points (bps). Investors sensed a possible slowdown in the pace of hikes, sending the dollar =USD to a three-week low. MKTS/GLOB FRX/

A surging dollar in recent weeks has sent emerging market (EM) currencies down 0.6% this month, while stocks have shed 0.5% on warning signs about growth amid intensifying risks of inflation and central banks' tightening moves.

"(EM equity returns) are likely to remain volatile in the -term due to continued uncertainty over the global growth outlook," said Regis Chatellier, director of EM strategy at Oxford Economics.

"However, elevated commodity prices, tightening cycles close to peaking, improved fiscal predicaments and increasing Chinese stimulus should support EM growth going forward."

Turkey's central bank raised its year-end annual inflation forecast to 60.4% from 42.8% three months ago, and lifted its end-2023 mid-point forecast to 19.2% from 12.9%, a presentation by Governor Sahap Kavcioglu showed.

For GRAPHIC on emerging market FX performance in 2022, see http://tmsnrt.rs/2egbfVh

For GRAPHIC on MSCI emerging index performance in 2022, see https://tmsnrt.rs/2OusNdX

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see CEE/

For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB

(Reporting by Anisha Sircar in Bengaluru and Marc Jones in London; Editing by Vinay Dwivedi and Bernadette Baum)