Jon Lieber from Eurasia Group discusses the potential US involvement in the Israel-Hamas war. Gerard Cassidy reacts to Morgan Stanley's earnings. Binky Chadha highlights the equity market's resilience. Diana Amoa expresses concern about sovereign debt issues in the treasury market.
Geopolitical tensions and the strength of the US dollar are negatively impacting emerging market currencies.
Emerging markets have shown resilience during the COVID-19 pandemic and are less likely to experience widespread crises in the next one to two years.
Deep dives
Dollar Strength and Geopolitical Tensions Impact Emerging Market Currencies
The strength of the US dollar and ongoing geopolitical tensions are negatively impacting emerging market currencies. The recent upside surprises from the US economy have boosted the dollar, while geopolitical uncertainty has led investors to seek safe havens, including the dollar. As a result, emerging market currencies have lost some of their value compared to earlier this year.
Emerging Markets Show Resilience Compared to Past Crises
Emerging markets have shown resilience compared to past crises, particularly during the COVID-19 pandemic. Many vulnerable economies have already engaged with the IMF for support, and the IMF stands ready to assist. While certain credits may face challenges due to upcoming maturities, the overall outlook for emerging markets is positive, with limited chances of widespread crises in the next one to two years.
The US Government's Fiscal Situation and its Impact on Emerging Markets
Emerging market nations are concerned about the US government's fiscal management, as it appears to be losing control of its finances. Despite preaching fiscal responsibility to other countries, the US has increased spending in response to political impasses and geopolitical tensions. This has led to a lack of appetite for US treasuries among investors and puts pressure on emerging markets as well.
Turkey's Recent Leadership Shift and Policy Changes
Turkey has experienced a leadership shift and is embracing more orthodox policies, which has led to positive market responses. The country has implemented aggressive rate hikes and a commitment to fighting inflation, signaling a shift towards more market-friendly policies. However, it is essential to carefully analyze individual emerging market opportunities rather than applying a one-size-fits-all approach.
Jon Lieber, US Managing Director at Eurasia Group, says the US could potentially become involved in the Israel-Hamas war if strikes happen beyond Gaza. Will Kennedy of Bloomberg News doesn't see a major disruption to oil flow in the short-term. Gerard Cassidy, Large Cap Bank Analyst at RBC Capital Markets, reacts to Morgan Stanley's sluggish 3Q earnings. Binky Chadha, Chief Global Strategist & Head of Asset Allocation at Deutsche Bank, says the equity market's resilience indicates durability in consumer demand. Diana Amoa, CIO of Long Biased Strategists at Kirkoswald Asset Management, says sovereign debt issues remain a concern for the treasury market going forward.