(Bloomberg) -- Stocks in developing nations climbed on Monday, with the benchmark index heading for its highest close in three weeks, amid optimism over trade talks between the US and its partners.
A gauge that tracks emerging stocks gained 0.55% and is trading near the highest level since the day after President Donald Trump presented his reciprocal tariffs. The MSCI Index leaped 3.4% last week.
The upward movement “seems to be driven by some optimism regarding a potential de-escalation of Trump’s tariffs,” said Gordian Kemen, head of emerging markets sovereign strategy at Standard Chartered.
Monday’s gains also put the EM stocks index above its 200-day moving average. If the gauge ends April with an advance, that would mark a gain in each of the first four months of a year — a feat last achieved in 2019. Earnings estimates for the gauge have risen 0.8% this month, the most since August.
For Michael Brown, a senior research strategist at Pepperstone Group Ltd, the recent EM rally has been largely driven by the broad “sell America” trade amid policy uncertainty from Trump. Those countries that reach trade deals with the US — which result in a permanent lowering of tariffs — are likely to outperform peers.
Meanwhile, in the foreign exchange market, currencies are trading mixed, with the MSCI currency index up just 0.1%. The South African rand and Argentina’s peso led the gains in the emerging basket, while the Chilean peso lagged its peers.
Earlier, assets in Colombia dropped after the International Monetary Fund paused access to an $8.1 billion flexible credit line. The country’s peso plunged as much as 0.8% while its dollar bonds fell across the curve, with notes maturing in 2035 down 1 cent to about 100 cents on the dollar
Trade Watch
Hopes have grown that the worst of the US tariff threat may be passing after Treasury Secretary Scott Bessent said last week that the US and South Korea could reach an “agreement of understanding” on trade as soon as this week. Bessent said Sunday that negotiations with some trading partners “are moving along very well, especially with the Asian countries.”
Traders this week will also be watching for key US data including growth and a gauge of inflation to assess if Trump’s trade war has begun to affect the economy. Meanwhile, Chinese officials Monday reiterated a pledge to aid growth ahead of the release of factory activity data later this week.
“Both US and China economic activity are expected to show signs of softening from the trade war and that will be negative for risk assets,” said Elias Haddad, a strategist at Brown Brothers Harriman & Co.
Bonds
On Monday, Angola’s bonds rallied for some of the biggest gains in emerging markets. The country held talks with the International Monetary Fund last week about possible financing packages, its finance minister said, after trade wars and a slump in energy prices effectively shut the oil producer out of international bond markets.
Bulgaria tapped international markets, selling Eurobonds for the first time this year. The country is issuing a total of €4 billion ($4.5 billion) in bonds, its biggest ever haul of euro-denominated debt in a single day, to fund its growing budget deficit in preparation for euro adoption.
--With assistance from Michael G. Wilson.