(Bloomberg) -- Emerging-market assets gained as traders digested the latest soft US labor-market data, which added to bets on Federal Reserve interest-rate cuts.
Gauges for emerging-market stocks and currencies were lifted as data showed that US companies added the fewest jobs last month since 2021 — just a day before the US payroll figures are released. Still, a separate report showed jobless claims trailed estimates.
Developing-nation equities closed higher for the first time this week, helped by gains in Taiwan Semiconductor Manufacturing Co. shares. Friday’s US payrolls report could help dictate the size of the Fed cut this month.
“US data resulting in expected lower US policy rates can drive a weaker USD, which in turn can be positive for financial conditions in emerging markets and ultimately also EM stocks,” said Peter Garnry, head of equity strategy at Saxo Bank.
Thursday’s data followed the Fed’s Beige Book survey on Wednesday, that showed flat or declining economic activity. That also led swap traders to ramp up bets on the pace of US rate cuts.
Local bond yields across much of the emerging world also declined as recent concerns over growth in China and in the US have led to market volatility. The average yield on EM sovereign dollar bonds fell to 7.02%, the lowest level since June 2022, overnight data showed.
“The risk wobbles of the last few sessions reinforce our view that it will be difficult to price further Fed easing without the growth worries chipping away at risk asset performance,” Goldman Sachs Group Inc. strategists including Kamakshya Trivedi wrote in a note to clients. “Nevertheless, we think the start of the Fed easing cycle will be supportive for EM assets, and we think that it will lead to a broadening out of the EM cutting cycle.”
In credit markets, Hungary sold 39.6 billion ($276 million) in an inaugural Samurai bond sale, after dropping two of the four parts of its initial offering. Hungary is the second east European nation to tap the Japanese market recently, after Slovenia sold ¥50 billion in three and five-year notes last week.
Elsewhere, a group of Ghana’s commercial creditors, including BlackRock Inc. and Abrdn Plc, backed a government offer to exchange about $13 billion of eurobonds for restructured notes — a crucial part of the West African nation’s debt rework.
Central Banks
On the monetary policy front, Egypt kept interest rates at a record high for another meeting as it weighs the effects of a new round of subsidy cuts on inflation that’s been slowing for five straight months.
In Nigeria, a 45% hike in the pump price of gasoline and continued downward pressure on the naira damped hopes that the central bank will press pause on an interest-rate increase at a meeting this month.
--With assistance from Zijia Song.
©2024 Bloomberg L.P.
