A man holding an umbrella walks over the Aioi bridge in Japan. (Photographer: Yuriko Nakao/Bloomberg)  

Emerging Markets Tumble as Argentina Struggles to Stop Bleeding

(Bloomberg) -- A selloff in emerging markets deepened as Argentina and Turkey struggled to shore up global investor confidence.

The peso tumbled to a record low, prompting Argentine policy makers to boost rates to 60 percent. In Turkey, a report that the central bank’s deputy governor was set to resign sank the lira. South Africa’s rand volatility soared amid a controversial land reform debate. An expanded foreign-exchange intervention in Brazil brought some relief to both the real and its peers. A little later, currencies extended losses as President Donald Trump was said to move ahead with a plan to impose new tariffs on China as soon as next week.

Emerging markets got pummeled again amid concern that Argentina and Turkey’s struggles to bolster their currencies will sink economic growth further -- while embroiling the rest of the developing world. That comes at a really bad time when considering the other challenges that investors face -- the end of an era of cheap money, prospects of a global trade war, American sanctions and deep political uncertainties in places such as Brazil.

“These currencies are infecting emerging markets,” said Shamaila Khan, director of emerging-market debt at AllianceBernstein in New York, referring to the Turkish lira and the Argentine peso. “There will be volatility around headlines, and today is one of the negative days.”

Highlights:
  • MSCI Emerging Markets Index fell 1.3 percent to 1,057.17
  • CBOE Emerging Markets ETF Volatility Index surged 12 percent
  • 20 of 24 EM currencies tracked by Bloomberg retreated
  • Risk premium on EM sovereigns +6bps to 365bps: JPMorgan indexes

Upcoming Friday:

  • The Bank of Korea sets interest rates. Weak jobs growth has cooled speculation of a rate increase, but the central bank has indicated its next move is up.
  • Bank of Russia First Deputy Governor Ksenia Yudaeva’s lecture on financial stability.
  • Chile unemployment
  • Brazil GDP, primary budget balance
  • Colombia unemployment
  • South Africa trade balance
  • South Korea industrial output
  • China PMI
  • India GDP
  • For a list of the day’s biggest earnings releases, click here.

Latin America:

  • ARGENTINA:
    • Merval Index gained 5.2 percent to 26,730.54
    • Peso fell 10.1 percent to 37.60 per dollar
    • Argentine Peso Crashes as Central Bank Raises Key Rate to 60%
    • Morgan Stanley said peso depreciation will probably continue
    • Goldman Sachs said nation should consider fiscal adjustment shock
    • IMF Mulls Argentina Plea to Speed Up Payments as Peso Slumps
  • BRAZIL:
    • Ibovespa declined 2.2 percent to 76,659.63
    • Real dipped 1.4 percent to 4.16 per dollar
    • 10-year local-bond yield advanced 38 basis points to 12.50 percent
    • Government expects this year’s deficit to be smaller than target
    • Brazilian Real Trims Drop Near Record as Central Bank Intervenes
    • A Scramble in Brazil to Hedge Against Higher Rates a Likely Flop
    • Lula Heir Competitive But No Shoo-in for Brazil Election
  • MEXICO:
    • Mexbol index fell 1.1 percent to 49,626.90
    • Peso declined 1 percent to 19.1369 per dollar
    • 10-year local-bond yield gained four basis points to 7.926 percent
    • Nafta Talks to Continue as Trump Says They’re on Track for Deal
    • Schroders’ Barrineau Sees Mexico Going From Wild Card to Haven
  • Click for market news on ANDES

EMEA:

  • TURKEY:
    • Lira declined 2.8 percent to 6.6555 per dollar
    • Central bank Deputy Governor Erkan Kilimci will resign from role
    • Fitch said nation’s banks may face negative rating actions
    • Turkey Must Look Back to Move Forward: Daron Acemoglu
  • SOUTH AFRICA
    • FTSE/JSE Africa All Share Index dipped 2.3 percent to 58,802.69
    • Rand declined 2.6 percent to 14.733 per dollar
    • 9-year local-bond yield gained 10 basis points to 9.038 percent
    • Budget deficit in July was the biggest in at least 14 years
    • Rand Price Swings Now Wilder Than During ANC Power Struggle
  • RUSSIA:
    • MOEX Russia Index dipped 0.7 percent to 2,330.92
    • Ruble declined 0.5 percent to 68.255 per dollar
    • 10-year local-bond yield gained five basis points to 8.73 percent
    • Russia Seen Hiking Rates 100-150bps If Ruble Drops Sharply: BofA
    • Deutsche Bank Touts Ruble Resilience Over Rand’s Vulnerabilities
  • Click for market news on POLAND and HUNGARY

Asia:

  • CHINA:
    • Shanghai Composite Index fell 1.1 percent to 2,737.74
    • Offshore yuan declined 0.7 percent to 6.8698 per dollar
    • 10-year local-bond yield slid three basis points to 3.595 percent
    • Trump wants to proceed with a plan to impose tariffs on $200 billion in Chinese imports as soon as next week
    • Fund Manager Followed by Thousands Goes All In China Stocks
  • INDIA:
    • Sensex Index dipped 0.1 percent to 38,690.10
    • Rupee declined 0.2 percent to 70.735 per dollar
    • 10-year local-bond yield gained two basis points to 7.9322 percent
    • Finance Ministry asked S&P to consider rating upgrade
    • BlackRock said it sees buying case for India amid limited contagion
  • Click for more on markets in ASIA

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