EM stocks, FX fall on renewed Iran war risks, but set for monthly gains

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April 30 : Most emerging market stocks and currencies dipped on Thursday on concerns that the Iran war could escalate, sending oil prices soaring over 7 per cent, while investors assessed the impact of a hawkish stance by the U.S. Federal Reserve.

Trump is slated to receive a briefing on plans for a series of fresh military strikes on Iran in hopes it will return to negotiations, according to an Axios report late on Wednesday, sending Brent crude prices to a fresh four-year high.

Since its outset, the Iran war has battered global markets and raised concerns about inflation, as shipping disruptions in the crucial region have kept oil prices elevated.

MSCI's indexes tracking global EM currencies and stocks dipped 0.2 per cent and 1.2 per cent respectively, but were set for robust monthly gains.

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The stocks gauge is set for its biggest monthly jump since November 2022, as risk appetite improved this month after the U.S. and Iran announced a temporary ceasefire, which was later extended even as negotiations stalled.

"With no sign of any peace talks and fears mounting about an escalation, oil prices have continued their gains of recent days... investors are pricing in a more protracted conflict," said analysts at Deutsche Bank.

Most stock indexes were lower on the day, including Asian ones that have seen robust gains on the back of euphoria around AI. Bourses in South Korea and Taiwan marked their best month in decades.

Stocks in Romania were flat and Hungarian ones gained 1 per cent, while Polish equities slipped 0.6 per cent. Turkish equities were up 0.4 per cent.

However, South African stocks gained 0.7 per cent, as gold prices rose over 1 per cent. The bullion is one of the country's top exports.

FED BOARD SPLIT, RUSSIAN ECONOMY CONTRACTS

On Wednesday, the U.S. Federal Reserve held rates steady at Jerome Powell's last meeting as Fed Chair, but it was the most divided board since 1992, with four dissents. Markets pulled back bets on any rate reductions this year, expecting them to be on hold through 2026.

"Three Fed members opposed the post-meeting language suggesting the central bank would eventually resume cutting interest rates, arguing it was too early to signal easing while the inflation outlook remains uncertain," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

"This divergence could complicate the Fed's communication under the new Chair, particularly as policy expectations evolve."

Turkey's lira fell 0.3 per cent, while South Africa's rand was flat. Emerging European currencies were mixed against the euro, but Romania's leu and Hungary's forint dipped 0.7 per cent and 0.8 per cent respectively.

The latter was set for its sharpest monthly rise since June 2012 as investors piled into the currency after centre-right party Tisza's sweeping victory in elections this month.

In Russia, the economy contracted by 0.3 per cent in the first quarter, marking its first quarterly contraction since early 2023, preliminary data showed on Wednesday.

Elsewhere, Sri Lankan bonds broadly fell by over 1 cent on the dollar each, hurt by the sharp spike in oil prices.

HIGHLIGHTS:

** Hungary's inflation rate could rise above 5 per cent in second half, central bank governor tells HVG.hu

** Asia's bond markets shake off war angst with record local issuance

** Energy prices push Polish inflation above forecasts in April

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see

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