Emerging markets are once again at the mercy of the United States-China trade war after investors spent an exhausting August pivoting between disappointment and optimism for a truce.
After one of the most painful months for emerging markets in years, traders will be watching for what comes next – and for signals that the Federal Reserve can foster global growth, according to Bloomberg.
Last month proved disappointing for money managers betting on rising stocks and stronger currencies amid trade tension and a resurgent dollar. September may not be much better, with Argentina imposing capital controls amid a currency crisis.
“For EM prospects to improve, we would need to see the Fed turning more proactively dovish and/or trade tensions abating,” Morgan Stanley strategists including James Lord in London wrote in a note. “Neither of these outcomes seem likely for now.”
Morgan Stanley said it expects developing-nation currencies to depreciate about two per cent against the greenback in the coming month.
The erratic US-China trade narrative was still in the spotlight as US tariffs on about $110bn of Chinese goods went into effect Sunday, as did Beijing’s countermeasures. Data at the weekend showed a further deterioration in manufacturing output from the world’s number-two economy.
(Punch)
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