China Rebound Fuels Best Day for Emerging-Market Stocks in 2024

(Bloomberg) — Emerging-market stocks had their best day so far in 2024 as China’s latest stimulus measures boosted risk appetite.

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A gauge of developing-world stocks rose 1.3% on Wednesday, while currencies advanced for a fifth day, though gains faded near the end of the trading day as investors brace for a slew of US economic data on Thursday, including GDP. Almost all Latin American currencies rose, with Colombia and Brazil leading advances.

Markets are seeing “a bout of risk on with commodities climbing, a Goldilocks daily rally with US treasuries and global yields tamed, after a soft start of the week,” said Alejandro Cuadrado, chief FX strategist at BBVA in New York. “Refreshing, but not sure how lasting.”

Asian stocks rallied after China reaffirmed its resolve to support markets by cutting banks’ reserve requirement ratio next month, on top of a $278 billion stock rescue package already announced. The moves follow a $4.6 trillion selloff since 2021 that left the nation’s mainland stocks trading at the lowest valuations in five years and its Hong Kong-listed stocks at the cheapest in eight.

“There’s nothing in the short-term that does more to benefit emerging markets than better news out of China,” said Charles Robertson, the head of macro-strategy at FIM Partners Ltd. “The RRR rate doesn’t resolve the geopolitical angst, heal the property sector or promise strong growth, but it is a signal that the authorities are prepared to do something to reverse the equity market decline.”

Read more: China to Cut Bank Reserve Ratio in Bid to Boost Growth, Markets

Mexico’s headline inflation unexpectedly accelerated to 4.90%, mostly due to rents and restaurant costs, complicating the outlook for interest rate cuts in Latin America’s second largest economy. In South Africa, meanwhile, inflation fell for a second straight month, giving the central bank food for thought on the eve of its policy decision that’s expected to keep borrowing costs unchanged at a 2009 high.

In Argentina, President Javier Milei’s measures to shore up public accounts and reduce the presence of the state in the economy cleared a key hurdle in congress, though his popular support is being tested by mass protests called by the nation’s powerful labor unions.

Investors will be turning their attention to a slew of US economic data on Thursday, including gross domestic product, seeking for clues on the Federal Reserve’s upcoming interest rate decision next week. US data released earlier on Wednesday showed business activity expanding and early trends indicate US companies were heading for a strong earnings season.

The European Central Bank’s monetary-policy decision Thursday will set the course for the euro and eastern European assets.

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