Emerging-Market Stocks and Currencies Ride Out Post-Fed Declines

(Bloomberg) -- Developing-nation equities were little changed as a retreat spurred in part by the Federal Reserve’s hawkish tone last week eased and analysts resumed earnings upgrades for companies. Brazil’s real led gains among peers as the dollar wavered in light trading before the holidays.

The MSCI Emerging Market Index was steady, deriving support from the 200-day moving average trend line and a rise in consumer discretionary stocks. Projections for profit at the gauge’s companies in the next 12 months increased for the first time in four days on Tuesday, according to data compiled by Bloomberg.

• The MSCI Emerging Markets Currency Index advanced 0.2 percent as the Brazilian real gained 0.6 percent.
• Mexico’s peso dropped 0.5 percent. It’s stuck in the worst selloff since the tequila crisis.
• The yuan rose to the highest in more than four months against an index of trading partners amid speculation PBOC is limiting the currency’s decline.
• The Hungarian forint strengthened 0.5 percent. The central bank sees faster growth in 2018.
• Indonesia’s rupiah fell 0.3 percent. Foreign funds continue to sell down bonds. They offloaded about 906 billion rupiah ($67 million) of securities on Dec. 19: finance ministry data.
• Bloomberg’s index of dollar-denominated sovereign bonds gained for the third day on Tuesday.

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What to Watch

• Brazil’s Congress approved a bill that provides cash-strapped states with debt relief and a holiday bonus: virtually no austerity in exchange.
• Turkey’s central bank is “adopting the ostrich strategy of sticking their heads in the sand and hoping for the best. This is not an advisable strategy,” Commerzbank analyst Peter Kinsella said.
• Poland central bank minutes (Dec. 22), Czech central bank decision (Dec. 22).
• Brent crude dropped 0.3 percent; EM asset correlation with oil falls to 22-month low.
• See Andes Daybook, Brazil Daybook and Mexico Daybook for other events.

--With assistance from Ben Bartenstein To contact the reporters on this story: Dana El Baltaji in Dubai at delbaltaji@bloomberg.net, Aline Oyamada in Sao Paulo at aoyamada3@bloomberg.net. To contact the editors responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net, Randall Jensen