Stocks extend gains as US-China talks enter second day
KUALA LUMPUR: Emerging market stocks stretched their winning streak on Tuesday as trade negotiations between the United States and China were set for a second day, providing signals of easing after months of high tension.
A 0.5 per cent gain in MSCI's emerging market equities index kept it on track for its sixth consecutive winning session - the longest such streak in nearly five months.
The broader currency index dipped 0.1 per cent after modest gains in the previous session.
Optimism around the trade talks kept global market sentiment upbeat, with the US dollar index steady as top officials from Washington and Beijing agreed to resume their meeting for a second day in London.
Investors broadly expect the two superpowers to revive a preliminary trade deal agreed last month, which had briefly relieved markets from US President Donald Trump's unrelenting tariff pronouncements.
"As long as the US can agree on trade agreements with its main trading partners before the end of the respite period in July, then the US and global economies could avoid a protracted recession, which is bullish for market sentiment," Kathleen Brooks, XTB research director, said in a note.
Tariff jitters, US fiscal concerns and fears of a slowing economy have put the spotlight on emerging markets as investors look to seek better returns from the developing region.
Emerging market sovereign and corporate bonds have rallied robustly in recent months as US trade war concerns have eased.
A blizzard of interest rate cuts means local currency bond yields - a proxy of government borrowing costs - are now almost as low as they were before the eruption of the Covid-19 pandemic in early 2020.
In Romania, the local currency leu was up 0.1 per cent against the euro and was headed for its seventh straight daily rise.
However, the currency is still struggling to recover from record lows in early May when a closely contested presidential election foreshadowed the fiscal and economic challenges ahead.
Latest data underscored those challenges, with Romania's foreign trade deficit growing to 3.14 billion euros in April, compared with a revised 2.85 billion euros the month before. The country has the EU's widest fiscal deficit.
The local index dipped 0.2 per cent, but was still trading near a record high.
Poland's blue-chip index rose 0.3 per cent for the day as it attempts to recover sharp losses from the previous week after conservative eurosceptic Karol Nawrocki won the June 1 presidential election.
The local currency zloty rose 0.1 per cent for the day as investors prepared for a confidence vote in the Polish parliament on Wednesday.
Hungary's forint lost 0.2 per cent after the government increased the net financing need by 651 billion forints (US$1.84 billion) to 4.774 trillion, while it also called to cut its growth expectation for 2025.
The Czech crown was flat for the day, while stocks in Prague slipped 0.4 per cent after annual inflation remained at 2.4 per cent in May, well above the country's central bank's two per cent target.
The numbers complicate the Czech National Bank's monetary policy path, given it trimmed borrowing costs by 25 basis points in May.
Meanwhile, the World Bank's latest Global Economic Prospects report will be released later in the day, with investors looking to assess how far growth in emerging and developing economies lags their richer peers.
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