Emerging market stocks were expected to end Friday with their biggest weekly declines in more than three months on growing fears of a global recession as central banks around the world aggressively tighten monetary policy to combat rising oil. inflation.
The MSCI index of emerging stocks fell 0.2%, down 4.6% for the week, its worst performance since March. Emerging market assets have been hit hard by interest rate hikes by central banks in developed countries, with the US Federal Reserve carrying out its biggest rate hike in more than a quarter century.
It sparked fears of tipping the world’s largest economy into a recession, and when combined with new COVID lockdowns in China beginning to impact its economy, the rise sparked a flight of assets from the markets. riskier emerging markets, as investors turn to safer bets and become more defensive. .
“The more aggressive line from central banks is adding headwinds to both economic growth and equities. The risks of a recession are rising, while achieving a soft landing for the US economy looks increasingly harder,” said Mark Haefele, chief investment officer of global wealth management at UBS.
“The expected decline in inflation has been delayed by the spike in energy and food prices resulting from the war in Ukraine, while the disruptions resulting from the pandemic are also lasting longer than expected.”
Turkish stocks fell nearly 2% for the week, while South African stocks fell 2.3% as both exchanges were poised for their second weekly decline.
Emerging market currencies struggled to advance for much of the week, with the MSCI index posting weekly declines of 0.5%. The index is heading into its second week of decline.
The Turkish lira lost 0.2% and was on track to record its ninth consecutive weekly decline – the worst losing streak since a currency crisis in December 2021, which was triggered by unorthodox monetary policy amid a global economic crisis. vertiginous inflation.