Emerging Markets Sway as Fed Policies Shake Investor Confidence

Emerging markets faced turbulence as stocks slipped and currencies steadied ahead of a crucial U.S. inflation report. The Federal Reserve’s hawkish stance unsettled investors, leading to market volatility. Russia, Hungary, Poland, and South Africa experienced significant market shifts, while China's bond yields dropped following unchanged lending rates.

Emerging markets took a hit with stocks slipping and currencies leveling out on Friday as everyone awaited a significant U.S. inflation report. The anticipation follows the Federal Reserve's recent hawkish policy stance, which has left investors uneasy, causing a week of market instability not seen in over a month.

As the Federal Reserve's favored inflation gauge, the Personal Consumption Expenditure index, was set to release, traders were eager for insights into potential policy easing next year. However, the Fed's earlier cautious projections for 2025 put pressure on emerging market stocks and currencies due to prospects of sustained high interest rates in the U.S.

In Russia, the rouble strengthened against the dollar ahead of a central bank's interest rate decision, aligning with President Putin's concerns over an overheating economy. Meanwhile, Hungary’s central bank intervened to stabilize the forint, and Turkey’s lira dipped further alongside Polish and South African stocks, reflecting widespread market jitters.

(With inputs from agencies.)