(Bloomberg) -- Emerging-market assets traded mixed Tuesday as traders stepped back from riskier bets as they await a report on US inflation for clues on the Federal Reserve’s path.
The MSCI emerging-market equities index closed 0.2% lower, snapping a six-day rally, while a companion gauge for currencies eked out a 0.1% gain at close after trading flat for most of the day. Investors were turning their attention to the release of consumer price index data Wednesday morning.
“It’s that silence before an important indicator,” said Marco Oviedo, a strategist at XP Investimentos. “A bad print could trigger a selloff and the opposite could spark a rally. So, no one wants to take a position before.”
The Brazilian real was the main outlier, advancing as much as 1.1%, amid potential measures that would unblock payments to lawmakers, which could pave the way for a highly anticipated vote on spending cuts. Markets are also following news about the health of President Luiz Inacio Lula da Silva, who is awake and conscious after undergoing emergency brain surgery.
In the rest of Latin America, the Chilean peso lagged as copper prices fell on China’s fading rally and the Mexican peso swung between gains and losses. BBVA FX strategists said Latin American currencies could gain ahead of the US inauguration, but they remain sensitive to news about tariffs under the Trump administration.
Moreover, while China’s top leaders have signaled bolder economic support next year with a pledge to embrace a “moderately loose” monetary policy, fresh trade data again pointed to weak domestic demand, according to Elias Haddad, a strategist at Brown Brothers Harriman.
“China cannot rely on exports to sustain a recovery in economic activity and needs to stimulate consumer spending,” he said in a note.
Elsewhere, Ukraine’s dollar bonds were among the top gainers across emerging markets after Poland’s prime minister said that talks on ending the war might start this winter.
Bank of America Corp. sold $1 billion of bonds as part of a so-called debt-for-nature swap, designed to help Ecuador get access to cheaper financing and put the savings toward environmental conservation.
Persistent inflation pressure in the Czech Republic may warrant a pause in interest-rate cuts as early as this month, while in Hungary, higher-than-expected CPI is taking the currency to its strongest close against the euro in two weeks.
“The currency has put the worst behind it,” said ING Bank NV strategist Frantisek Taborsky. “Hungarian government bonds have seen new inflows in recent days.”
©2024 Bloomberg L.P.