Emerging Markets See Gains Amid Optimism for Peace Deal Progress

Bloomberg: Emerging-Market Stocks and Currencies Gain on US-Iran Peace Deal Hopes

Emerging-market stocks and currencies gained on the week as investors became increasingly hopeful that the US and Iran are moving closer to a peace deal. The MSCI's EM currency gauge was little changed on Friday, eking out a gain of 0.05% over the week. The Colombian peso and the Indian rupee outperformed on Friday.

The appetite for riskier assets has picked up in recent days due to hopes that turmoil in the Middle East will ease. On Friday, Pakistan's army chief, the favored interlocutor between Washington and Tehran, arrived in the Iranian capital amid signals of progress in talks to end the war. Additionally, the United Arab Emirates joined Saudi Arabia and Qatar in urging US President Donald Trump to give negotiations a chance.

Timing of a Deal Remains Uncertain

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While investors are optimistic about the prospects of a peace deal, some hawkish signals are coming from the Federal Reserve. Governor Christopher Waller supports making clear that the central bank's next interest-rate move is just as likely to be an increase as a cut. He also emphasized the importance of being patient in holding rates until the war's impact is clearer.

Emerging Markets Equity Index Rises

MSCI Inc.'s Emerging Markets Equity Index rose 0.6% on Friday, closing the week 0.8% higher. Demand has remained strong for shares of emerging-market companies, mainly in Asia, that stand to benefit from the AI boom.

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"It's all about technology," said Guy Miller, chief markets strategist at Zurich Insurance. "Investors are thinking that here is a story that can be played for a bit longer — the demand for semiconductors and the supply of them."

Turkey's Selling Pressure Eases

Selling pressure in Turkish stocks eased after Thursday's selloff, which was sparked by a Turkish court decision to remove the leadership of the country's main opposition party. Dollar bonds rebounded on Friday, outperforming in emerging markets. However, the lira was among the biggest decliners in EM, even after the central bank sold some $6 billion on Thursday to defend the currency.

Ukraine's Dollar Bonds Jump

Ukraine's dollar bonds maturing in 2029 jumped to a record high of 84 cents on the dollar on Friday as the country and its allies grew increasingly confident that Russia's invasion is running out of steam.