Stocks, FX muted
IMF raises global 2026 economic outlook on AI boom expectations
Romanian shares lead regional declines ahead of monetary policy
Egypt’s EGX gains after regulatory approval for futures trading
By Twesha Dikshit
Jan 19(Reuters) - Emerging market assets were largely unchanged on Monday as a fresh set of tariff threats from U.S. President Donald Trump weighed on risk sentiment, on a day that logged thin trade due to a public holiday in the U.S. Trump vowed to implement a wave of increasing tariffs from February 1 on eight EU members until the U.S. was allowed to buy Greenland. It called into question signed trade agreements, with European nations preparing to retaliate against measures they have decried as blackmail.
Both the MSCI emerging markets stock index (.MSCIEF) and the corresponding EM currency index (.MIEM00000CUS) were little changed.
“The market dynamic that we are seeing increasing evidence of is that U.S. assets (including the USD) are now carrying a much higher political risk premium,” said Chris Weston, Pepperstone’s head of research.
“It may well encourage investment funds to reduce their USD notional exposures held in relation to their U.S. equity holdings and alter hedge ratios. That would negatively impact the USD and add further upside pressure to the precious metals trade.”
Markets kicked off the new year dealing with escalating geopolitical tensions in regions around the globe, including in Venezuela, Greenland and Iran, that have injected uncertainty into foreign policy and led to a rally in precious metals.
Still, EM assets have shown resilience with the broader stock index trading at record highs after outperforming Wall Street in 2025. JPMorgan data on Friday showed EM equity funds clocked the second-largest weekly inflow in the brokerage’s tracking history at $9.7 billion.
STOCKS MIXED, CURRENCIES LOWER Most central and eastern European indexes were lower on the day with Poland’s (.WIG20) down 0.7% Polish central banker Joanna Tyrowicz told a local radio that there seemed to be no room for cutting interest rates. The Monetary Policy Committee kept rates steady last week.
Indexes in Czech Republic (.PX) , Hungary (.BUX) dropped 1.1% and 0.7%, respectively. Romania’s BETI index (.BETI) fell 1.8% ahead of a central bank rate decision later in the day. Most economists expected interest rates to remain unchanged.
Currencies in the region were broadly weaker against the euro, with the Hungarian forint (EURHUF=) down the most at 0.8%. Rating agency Fitch had warned last week that a raft of European countries could face a credit rating downgrade if tensions with the U.S. fractured NATO and raise potential of more trouble with Russia.
A bright spot, Egypt’s benchmark index (.EGX30) gained almost 2% after receiving regulatory approval to launch futures trading. Turkey’s index (.XU100) rose 0.7%.
Over in Asia, stocks were mixed with those in Korea (.KS11) and Taiwan (.TWII) 1.3% and 0.7% higher, respectively, on AI trade optimism. The International Monetary Fund raised its 2026 global growth forecast to 3.3% with expectations for AI investments to offset headwinds from trade disruptions.
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EMERGING MARKETS-EM assets muted as markets navigate fresh Trump tariff threats