On Monday, emerging market stocks fell to their lowest level in more than two weeks, as investors were alarmed by a COVID warning from China, who were already anxious about growing global inflation. By 0843 GMT, MSCI’s developing market equities index had down 3.1 percent, with Asian markets leading the declines.
Hong Kong stocks dropped 3.2%, while China shares shed 1.2%. Asian markets also reacted to red-hot consumer price data from the United States, which fuelled concerns of an increasingly aggressive stance by the Federal Reserve.
Beijing is suffering an “explosive” COVID-19 outbreak connected to a bar, a government spokesman said on Saturday. Shanghai, meanwhile, has conducted mass testing to contain a jump in cases tied to a hair salon.
The figures also dashed hopes of inflation having peaked in the United States. The Fed is now expected to lift its lending rate by at least half a percentage point at the end of its two-day meeting on Wednesday.
“Investors are now fretting that the economic data will force the U.S. Federal Reserve’s hand into pushing interest rates up, further and faster than previously forecast.”
“Markets have set off on another rocky ride over inflation fears, following a stronger jump in (the) U.S. consumer price index that was greater than even analysts’ higher estimates,” said Steve Clayton, fund manager at Hargreaves Lansdown.
Currencies in the developing world also took a hit against a strengthening dollar, with South Africa’s rand down 1.2%. The currency touched its lowest in nearly four weeks.
India’s rupee hit a record low of 78.28 per dollar, while bond yields spiked to their highest levels in more than three years. Turkey’s lira fell to 17.27 per dollar at one point in the day.
Data showed Turkish industrial production had grown 10.8% year-on-year in April, faster than a Reuters poll forecast of 8% and rising for a 22nd consecutive month. Production is holding firm against a background of lira weakness and rampant inflation
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