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No relief for EM equities as growth worries offset Fed boost

Those hoping for a respite in the sell-off in emerging market stocks were left disappointed on Monday.

The MSCI Emerging Market Index — a benchmark for developing country equities — fell for a second straight session, dropping 1.2 per cent to 1,046.49 as concerns over sputtering global economic growth continued to unsettle investors.

Monday’s decline — which adds to a 0.9 per cent fall on Friday — threatens to drag the gauge back below its 50-day moving average, a key short-term momentum level often watched by traders. The last time the index fell below its 50-DMA, which sat at around 1,040 on Monday, was in early January.

The flight from risk — which also drove a sharp rally in sovereign bonds — took hold on Friday after a run of surprisingly weak eurozone economic data and the inversion of a closely watched part of the Treasury yield curve triggered fears of a deepening slowdown.

The sell-off reached Asia in full force on Monday, with mainland China’s CSI 300 tumbling 2.4 per cent and Hong Kong’s Hang Seng sliding 2.2 per cent.

The two-day decline effectively wiped out the boost the Federal Reserve gave to the MSCI EM index last week when — in a more dovish than expected policy shift — it ruled out further rate hikes this year and announced plans to halt its balance sheet shrinkage by September.

“The sell-off validates our scepticism that a dovish Fed will be sufficient for capital inflows into risky assets witnessed over the past few months to prove sustainable,” said Rabobank in a note to clients on Monday.

“We believe this is especially so considering the outlook for the global economy is clouded by uncertainties caused by trade tensions, Brexit and prevailing vulnerabilities in various emerging markets.”

Adding to the macroeconomic headwinds are country specific issues — including fresh economic turmoil in Turkey and political developments in Brazil that threaten to derail the new president’s reform agenda.

EM currencies were steadier on Monday however amid a broader dollar retreat. The JPMorgan Emerging Market Currency Index, having tumbled 1.7 per cent for its biggest one-day decline since last August on Friday, was 0.7 per cent higher.

US Markets :Slow start to the week. Little change in the major indices after an up and down day

S&P and Nasdaq down. Dow has a modest gain.

The US stock market, after the rout on Friday, is ending the day with modest losses/gains.
The final numbers are showing:
  • S&P index, -2.35 points or -0.08% at 2798.36. The high reached 2809.79. The low reached 2785.02
  • Nasdaq fell -5.124 points or -0.07% at 7637.54. The high reached 7662.379. The low reached 7579.29
  • Dow rose 14.51 points or 0.06% at 25516.83. The high reached 25603.27. The low extended to 25372.26.
Apple was in the news by announcing a new Apple TV+, a new News+ servive, a new Apple credit card and Apple Arcade.  The price of Apple was lower on the day 1.21% on the day. It has been running higher of late reaching a high of $197.67 on Friday (highest since November 12). The price was above the 200 day MA at $190.63. Today, the price is closing back below that MA at $188.58.

Chinese premier Li says China able to resist downwards pressure on economy

Chinese premier Li Keqiang is speaking on state television

He might sound like a broken recorder but when it comes to comments like these, it’s always best to be aware about the frequency and timing of them. The fact that Chinese authorities have been constantly out on the wires delivering this message every couple of days is to remind market participants that they are present and willing to step in to support the economy if need be, especially in times of doubt like what we’re seeing in markets now.
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