Emerging market stock shows surge after Trump's big progress in trade talks

Emerging-market stock indexes inched higher on Monday, the last trading day of a rough year for developing economies, as investors cast a cautious eye on President Donald Trump's latest claims of "big progress" in Sino-U.S. trade relations.

Over the weekend, Trump tweeted that he had a "long and very good call" with Chinese President Xi Jinping and that a possible trade agreement between the two sides was progressing well.

With most markets already shut for the New Year holiday, that was enough to drive the fourth day of gains for India's benchmark indices, as well as a gain of 0.5 per cent in South Africa. But overall, MSCI's index of emerging-market shares was still set to log losses of more than 16 per cent for 2018 as a whole.

"(The) market is more likely to stay put at this point and wait for further solid evidence from the face-to-face meeting in mid-January," analysts at Mizuho Bank said in a note.

The trade dispute between the world's two biggest economies has been a major factor worrying financial markets all year. After agreeing in November to halt additional tariffs and reach an agreement within 90 days, a U.S. trade team will travel to Beijing next week to hold talks with Chinese officials.

In a year where a cocktail of higher oil prices, rising borrowing costs and domestic politics have hurt riskier assets, a 3 to 6 per cent yearly gain for Indian indices makes it one of the few emerging markets in the black.

Russian stocks, which had their last trading session on Friday, will end with a 12 per cent rise. Stock markets in China, Turkey and South Africa are set to post their worst year in a decade.

Most Asian currencies gained on Monday as the dollar trod water. The South African rand gained 0.4 per cent, while Turkey's lira weakened, on course for a yearly loss of more than 28 per cent.

Concerns about President Tayyip Erdogan's influence on monetary policy and relations with the United States have been soothed by September's 6-percentage-point hike in interest rates and the release of a jailed U.S. pastor. But fears over high prices of imported oil will continue to have an effect.

The rand is also set for a yearly loss after South Africa slipped into its first recession since 2009 in the second quarter. The worst performer of commonly watched emerging-market currencies is Argentina's peso, which has halved in value against the dollar.

Runaway inflation has led Argentina to raise benchmark interest rates dramatically - first to 45 per cent, then to 60 per cent - pushing its economy into recession and prompting it to turn to the International Monetary Fund for a funding facility to shore up its finances and halt the currency's plunge.

Eastern European currencies barely moved on Monday against a steady euro. On the year, a roughly 3 per cent fall for the Hungarian forint would be its worst result since 2014.