The MSCI's index for EM stocks bounced 0.9% after falling about the same in the prior session. Equities in Asia jumped, with China and Hong Kong shares closing up more than 1% each.
The rescue of Credit Suisse over the weekend helped stem a brutal selling in bank shares, and came just in time for the Fed's two-day meeting that commences later in the day. U.S. interest rate futures pricing now implies a 25-basis-points rate hike on Wednesday - a dramatic turnaround from a steep 50 bps rate hike expected before the banking crisis. "If the Federal Reserve surprises markets by leaving rates unchanged, this could signal the end of the rate hike cycle with the next move being a cut in rates," said Lukman Otunuga, senior research analyst at FXTM. "Markets might also take it as a sign that the Fed fears contagion risks in markets via the banking sector, and this would likely see a sharp sell-off in stock markets."
Liquidity conditions in China's interbank money markets showed signs of stress as seasonal cash demand kicked in, while the central bank's move to lower the amount of cash banks must set aside as reserves has yet to come into effect.
Separately, Russian President Vladimir Putin and Chinese leader Xi Jinping were due to hold further talks on Tuesday amid Western criticism that Xi's visit was giving a boost to Moscow as it struggles to make ground in its year-long war on Ukraine. Russia's rouble strengthened on higher foreign currency supply as exporters prepare to make tax payments, and optimism about the Russian economy amid Xi's visit to Moscow. Other EM currencies, however, were muted. The MSCI's EMFX index edged 0.1% higher.
Risky developing market assets are coming off two weeks of banking-driven selloff, with the stocks index now headed for its second straight month of falls.
The Turkish central bank's net international reserves rose by $6 billion last week to $25 billion, three bankers' calculations showed, after a $5 billion deposit from Saudi Arabia entered its accounts. The lira remained unchanged. Sri Lanka will get the first $330 million tranche of an International Monetary Fund bailout in the next two days, the global lender said.
South African financial markets were closed on Tuesday.
For GRAPHIC on emerging market FX performance in 2023, see For GRAPHIC on MSCI emerging index performance in 2023, see For TOP NEWS across emerging markets For CENTRAL EUROPE market report, see For TURKISH market report, see For RUSSIAN market report, see (Reporting by Shreyashi Sanyal in Bengaluru; Editing by Maju
Samuel)
