EMERGING MARKETS-EM stocks inch up, FX muted ahead of Fed decision; Iran progress stalls

Most emerging market ‌stocks ​inched higher on Wednesday while currencies were subdued as investors weighed stalled Iran peace talks and awaited the U.S. Federal Reserve's monetary policy decision later in the day. MSCI's gauge tracking global EM stocks inched up 0.3%, but was still below its record high ‌hit on Monday.

Most emerging market ‌stocks ​inched higher on Wednesday while currencies were subdued as investors weighed stalled Iran peace talks and awaited the U.S. Federal Reserve's monetary policy decision later in the day.

MSCI's gauge tracking global EM stocks inched up 0.3%, but was still below its record high ‌hit on Monday. South Korean stocks were up 0.8%, while Taiwanese equities lost 0.6%, ahead of quarterly reports from U.S. tech giants Microsoft, Alphabet, Meta and Amazon.com after markets close on Wednesday. The euphoria around the technology has helped many Asian bourses hit record highs this year.

Caution prevailed ahead of the Fed's monetary policy decision, where the central bank is widely expected to hold interest rates ‌steady. Focus will be on comments from Chair Jerome Powell - whose term ends next month - on how policymakers will tackle headwinds from the Iran conflict.

"With talks between the U.S. ‌and Iran stalling and the Strait of Hormuz still closed, fears of higher-for-longer oil prices and more hawkish central banks have kept government bond yields well above pre-conflict levels," said analysts at UBS Global Wealth Management. "But markets have overpriced the risk that central banks will hike, or not cut, interest rates. Policymakers typically look through supply shocks such as oil spikes."

Most currencies were rangebound as the dollar was largely flat. Turkey's lira was subdued, while ⁠South Africa's rand ​was down 0.4%. Emerging European currencies were muted ⁠against the euro, with MSCI's global EM currency measure off 0.1%.

On the war front, efforts to end the war reached an impasse, as President Donald Trump remained unhappy with Iran's latest peace proposal, with the U.S. saying ⁠Iran was in a "state of collapse". A report said the U.S. was planning to extend its blockade of Iran, sending oil prices higher.

The conflict had battered global markets and raised concerns of energy-driven inflation, as ​shipping through the crucial waterway was choked. Many countries capped fuel prices and reduced import duties, with Poland's finance minister saying measures could be extended if the situation ⁠demanded.

Amid the crisis, the United Arab Emirates said it was quitting OPEC and OPEC+ on Tuesday. Dubai stocks were up 0.2% on Wednesday. "This does not change anything about the near-term supply-demand balance. Only after the Strait of Hormuz ⁠reopens can ​we discuss the UAE ramping up oil production," said Bas van Geffen, senior macro strategist at Rabobank.

"If other countries follow... it erodes the OPEC's cartel. The balance of powers in the region already seems to be shifting." Stocks in emerging Europe were broadly higher, with Hungary up 0.2%. Polish stocks gained 0.1% after seven sessions of losses.

Romania's stocks were 1% ⁠higher. The minority government of Romania's pro-European Prime Minister Ilie Bolojan could fall in early May after the leftist Social Democrats, and the far-right opposition submitted a no-confidence motion on Tuesday. The ⁠country's bonds fell on prospects of another ⁠government collapse.

Turkish equities gained 0.5%, while South African ones slipped 0.3%. HIGHLIGHTS:

** Thai central bank holds key rate, forecasts slower growth and higher inflation ** Malaysia to slash 2026 federal operating spend over Iran war costs

** Four months in, foreign outflows from Indian shares top last year's peak For ‌TOP NEWS across emerging markets

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