EMERGING MARKETS-Stocks soar on Fed's rate cut stance, Sri Lankan dollar bonds jump

The emerging market stocks index rallied on Thursday, as investors cheered the Federal Reserve's indication it will still deliver three rate cuts this year, while Sri Lanka's dollar bonds climbed on report of bond reworks talks set to start next week. The MSCI index for EM stocks jumped 1.7%, on track for its strongest one-day percentage gain this year, while the currencies gauge climbed 0.3%, set to snap a seven-day losing streak.

The emerging market stocks index rallied on Thursday, as investors cheered the Federal Reserve's indication it will still deliver three rate cuts this year, while Sri Lanka's dollar bonds climbed on report of bond reworks talks set to start next week.

The MSCI index for EM stocks jumped 1.7%, on track for its strongest one-day percentage gain this year, while the currencies gauge climbed 0.3%, set to snap a seven-day losing streak. Keeping rates unchanged as expected, Fed Chair Jerome Powell noted recent high inflation readings had not altered the underlying "story" of slowly easing price pressures as the central bank stuck to its projection of three rate cuts this year.

"This would put less capital pressure on emerging markets and traders can start picking up value in more depressed EM stocks," said Simon Harvey, head of FX analysis for Monex Europe. "We can start looking towards better growth prospects in EM on looser monetary policy because a lot of the central banks especially in Asia have been holding higher rates trying to match the Fed purely because the implications it would have for their local currency if all of a sudden they cut in advance and from a much lower base."

Further, a deputy central bank head said China has room to further cut banks' reserve requirement ratio (RRR), underlining expectations for more easing measures to bolster economy. Hong Kong's Hang Seng index and the Mainland Properties index jumped 1.9% and 3.3%, respectively, even though Chinese property developer Radiance Holdings slumped 7.7% after missing repayment of a $300-million offshore bond due the previous day.

Investor focus was also on other policy decisions in the EM space, with Turkey's rate decision due during the day expected to leave rates unchanged at 45%, though most economists forecast another rate hike later this year, a Reuters poll showed. While the lira weakened nearly 1% against the dollar, the benchmark stock index jumped 1.5%.

A media report showed global investors and Sri Lankan officials expect to start negotiations aimed at restructuring $12 billion in defaulted global bonds next week, helping the 2028 bond witness the biggest gains, up 2.03 cents at 56.49 cents, Tradeweb data showed. Elsewhere, Taiwan delivered a surprise rate hike, and also lifted annual inflation forecast as price pressures persist.

Brazil cut its rate by 50 basis points on Wednesday, as expected, while Mexico will announce its policy decision later in the day. HIGHLIGHTS:

** Russian rouble steadies as focus turns towards rate decision on Friday

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)