Emerging market stocks experienced gains on Monday, driven by optimism surrounding the potential for improved relations between China and the United States. Chinese equities rebounded following remarks made by U.S. President Joe Biden, while the Turkish lira continued to struggle, reaching record lows.
At 0849 GMT, MSCI’s emerging market equities index rose by 0.6%, with mainland Chinese stocks also posting similar gains, breaking a four-session losing streak. China’s central bank has pledged to support economic growth after weak data in April indicated sluggish consumer demand, dampening sentiment towards Chinese stocks.
President Joe Biden’s comments expressing expectations of a thaw in strained relations with China further bolstered market sentiment. The Chinese yuan initially made gains but later fell by 0.3% as China maintained its benchmark lending rates for the ninth consecutive month, in line with market expectations.
Meanwhile, the Turkish lira hit a record low of 19.82 against the dollar. The currency has steadily weakened since the outcome of the first round of presidential elections last week, disappointing investors who were hoping for an opposition win and a return to orthodox monetary policies.
Data revealed that Turkey’s consumer confidence index increased by 4.1% to 91.1 points in May, maintaining an upward trend ahead of the second round of voting scheduled for later this month. However, uncertainties remain as market analysts warn of the potential for a Turkish lira depreciation hit, even before the second round of voting.
Turkish President Tayyip Erdogan will attend a meeting in Istanbul on Monday, while Sinan Ogan, the nationalist presidential candidate who finished third in the initial vote, is expected to announce his decision to endorse either Erdogan or his rival Kemal Kilicdaroglu in the runoff vote.
Among central and eastern European currencies, the Polish zloty saw a 0.2% rise against the euro following the release of economic data. Polish corporate sector wages in April increased by an annual rate of 12.1%, in line with expectations, while growth in producer prices fell short of estimates.
The broader index of emerging market currencies remained largely unchanged, and the U.S. dollar maintained stability as negotiations surrounding the U.S. debt ceiling were set to resume after a setback last week.
Later in the day, President Joe Biden and House Republican Speaker Kevin McCarthy were scheduled to meet to discuss the debt ceiling, following a positive phone call between both parties on Sunday.
In other news, the Bank of Israel is anticipated to raise interest rates on Monday due to high inflation levels.
