Rate cut expectations boost risk appetite, emerging market stocks hit a 2-year high
Due to expectations of easing monetary policies in both developed and developing economies, emerging market stocks have reached a two-year high, and emerging market currencies have also risen. In addition, the release of US CPI data may increase the likelihood of a rate cut by the Federal Reserve in September. The slowing inflation rates in some emerging market countries further support the expectations of a rate cut. These data have a positive impact on investors' risk appetite
According to the Zhitong Finance and Economics APP, due to the strengthening of bets on developed and developing economies relaxing monetary policies, investors' risk appetite remains strong, with emerging market stocks hitting a two-year high and emerging market currencies also rising. Data shows that on Thursday, the MSCI Emerging Markets Stock Index rose by 1% to its highest intraday level since April 2022; the Emerging Market Currency Index against the US dollar rose by 0.1%.
The US CPI data for June, to be released tonight, may increase the likelihood of the Fed starting to cut interest rates in September. Meanwhile, data released by several emerging markets this week also shows a slowdown in price growth.
Francesco Pesole, an analyst at ING, said, "As the US June CPI is about to be released, investor risk sentiment has improved, perhaps because the market expects this data to prompt the Fed to cut rates in September."
Data released on Thursday showed that Romania's inflation rate fell to its lowest level since 2021, increasing the space for the country's central bank to continue its monetary easing policy after the first rate cut in three years. Inflation data released earlier this week in the Czech Republic and Hungary also led to a decline in their currencies. Czech National Bank Deputy Governor Eva Zamrazilova said that lower-than-expected inflation in June indicates further room for monetary policy easing in the Czech Republic, but the central bank will not cut rates significantly.
Serbia also made an interest rate decision on Thursday. More than half of analysts expect the Serbian central bank to keep the benchmark rate at 6.25% unchanged; the remaining analysts expect the central bank to implement a second 25 basis point rate cut within two months. In addition, the Malaysian central bank kept its benchmark rate unchanged on Thursday, providing room to assess the impact of potential price increases as the government cancels fuel subsidies nationwide