EMERGING MARKETS-EM assets steady with Russia-Ukraine updates in the spotlight

Emerging market assets were steady on Wednesday with investors monitoring a slew of local data indicators, including a monetary policy decision from Poland's central bank, while focus remained on the ongoing talks toward a peace deal in Ukraine. Russia and the U.S. did not reach a compromise on a potential peace deal to end the war after a five-hour Kremlin meeting between President Vladimir Putin and Donald Trump's top envoys, the Kremlin said.

Emerging market assets were steady on Wednesday with investors monitoring a slew of local data indicators, including a monetary policy decision from Poland's central bank, while focus remained on the ongoing talks toward a peace deal in Ukraine.

Russia and the U.S. did not reach a compromise on a potential peace deal to end the war after a five-hour Kremlin meeting between President Vladimir Putin and Donald Trump's top envoys, the Kremlin said. The Russian rouble came under pressure, weakening 0.2% against the greenback, while the Moscow Exchange's main stock index fell as much as 1.6%.

Ukraine's international bonds dropped nearly 3 cents. The zero-interest 2035 maturity suffered the biggest drop, falling 2.8 cents to bid at 52.73 cents on the dollar, Tradeweb data showed. Miner Ferrexpo, which has a Ukrainian focus, slumped 12%. Resumption of efforts toward ending the war had aided EM markets last week. Yet, expectations that a compromise could be reached soon have been met with skepticism.

"Positive surprises (in peace talks) would definitely be a boost to market sentiment globally, but especially in Central and Eastern Europe. You've already seen these dynamics in Ukrainian euro bonds and dollar bonds and that's something that is going to be reflected as we move ahead," said EM economist Simon Quijano-Evans. "(A peace deal) could see positive downside effects on inflation across the region and the revival in growth driven by investments into Ukraine that would spread elsewhere towards Central and Eastern Europe."

The European Commission plans to make a legal proposal this week to use frozen Russian assets to fund Ukraine while also considering other funding possibilities, sources told Reuters. Global risk sentiment improved on the day after a bumpy start to the week, with expectations of a U.S. Federal Reserve rate cut next week all but baked in.

DOMESTIC DATA INDICATORS EYED Poland's zloty was flat while the benchmark WIG20 Index ticked up ahead of a monetary policy decision from its central bank. The main interest rate is widely expected to be reduced by 25 bps to 4% on lower-than-expected inflation.

Turkey's inflation dipped more than expected, easing to 0.87% month-on-month and 31.07% annually, official data showed on Monday, reinforcing expectations of a rate cut next week. The lira dipped 0.3% against the dollar, while equities dropped 0.4%. Analysts at Capital Economics said the inflation reading could pave the way for a larger cut than their forecasted 100 bps.

Romania's gross funding needs for 2026 are expected to grow between 275 billion lei and 285 billion lei ($63 billion-$65 billion) but public debt will be managed through a range of measures, debt agency chief Stefan Nanu told Reuters. The leu was little changed against the euro, while Bucharest's BETI Index moved higher.

Egypt's equities advanced 1.6% with the country's non-oil private sector recording its fastest growth in five years in November. Over in Asia, Korea's KOSPI Index was up over 1% for the second consecutive day, while Hong Kong and Philippine stocks were sharply lower.

Indian rupee continued its underperformance, slipping past 90 per U.S. dollar to a new record low. For TOP NEWS across emerging markets

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