Global markets prepare for a strong reaction on Monday after Donald Trump imposed tariffs on Canada, Mexico and Chinawhich could stop growth and increase inflation. In that sense, most emerging market assets fall.
The Mexican peso falls almost 2%, its lowest point in almost three years, since 80% of Mexican exports have the USA. In response, Mexico and Canada announced tariffs in retaliation, while China planned to challenge tariffs in the World Trade Organization.
In South Africathe assets also cut land after Trump’s decision to cut the financing, with the RAND losing 1.2% and the yields of the government bonds rising significantly. Investors are concerned about prolonged tariffs that could generate inflationary pressures and negatively affect emerging markets.
Mexico and Canada They immediately announced, tariffs in retaliation, while China said it would challenge the order before the World Trade Organization.
“I think the repercussions could be very worse than the market expects. There are probably no safe shelters, ”said Himanshu Porwal, Credit Analyst for emerging markets of Global Seport.
What investors look at
Investors will remain attentive to more clues of Trump’s call with the leaders of Canada and Mexico later in the day. Trump’s “friendly” conversations with China had given some relief before, since investors believed that the US could adopt a smoother approach to tariffs.
However, the measure of February 1 generated concerns about a global commercial war, with investors around the world selling shares and the US dollar rising in front of most global currencies.
The Yuan Offshore cut some losses after touching a historical minimum of 7,3765 per dollar, while Hong Kong’s shares closed almost unchanged, after having touched a minimum of more than a week. Dollars in dollars issued in emerging market economies such as Egypt, Jordan and Kenya also fell.
The MSCI index that follows the global currencies of emerging markets (.MEM00000CUS) dropped 0.5% to levels not seen for two weeks, while the CBOE shares indicator: EFS fell 1.8%. Continental Chinese markets were closed by a holiday.
The Eastern European currencies weakened in front of the euro, with the Polish Zloty falling 0.6%. The Czech crown and the Hungarian Forinth also dropped 0.3% each.
The regional stock market indices were mostly negative, with those of Poland and Hungary falling 2.1% and 0.8%, respectively.
The Turkish lyre weakened 0.3% to a historical minimum against the dollar. The data showed that the monthly inflation rate rose more than expected in January.
Source: Ambito
