By Katherine Greifeld and Ben BartensteinEmerging markets look to be in a sweet spot.Developing-nation assets roared back Friday after Federal Reserve Chairman Jerome Powell said policymakers are listening carefully to markets, denting dollar and boosting allure of riskier investments.
Leading charge among currencies was Turkish lira, one of last years biggest losers.
It posted its best one-day gain against greenback since October and every major emerging-market currencies advanced.
The global economic outlook also received a boost from a better-than-expected US jobs report.While a one-day rally may well be just that, bulls say developing-nations assets are close to a pivot point.
Bank of Americas Bull Bear Indicator, a gauge that told investors to sell right before emerging markets tanked a year ago, just flashed its first buy signal for risky assets since Brexit vote in June 2016.
Meanwhile, Citigroup Inc.
upgraded developing-nation shares, calling them its "preferred value play," and BlackRock said attractive valuations offer a positive backdrop for asset class.You have Fed pricing thats very non-threatening, you have US economy doing quite well despite some of hyperventilation about where its going, said Ilya Gofshteyn, a strategist at Standard Chartered in New York.
He expects lira and other 2018 stragglers such as Argentine peso, South African rand and Russian ruble to climb in first quarter.Chinese SupportIt wasnt just currencies.
The largest emerging-market equity exchange-traded fund had its biggest gain in more than two months, while risk premium on sovereign debt narrowed by most since November 2016, according to data compiled by JPMorgan Chase Co.Helping underpin rally was optimism ahead of next weeks meeting between US and Chinese delegations on resolving trade disputes that have rattled global markets.
In addition, Peoples Bank of China said it will trim its reserve requirement ratio by 1 percentage point, releasing about $116 billion of liquidity.
The attempt to shore up nations slowing economy will feed into broad emerging-market strength, according to Frances Donald, head of macro strategy at Manulife Asset Management in Toronto.Meaningful policy easing from Beijing that could support a bottoming-out in Chinese growth has been missing key ingredient for EM complex, she said.For now, 2019 is looking pretty upbeat for developing world.Friday will best be remembered for being a big risk-positive day, said Alan Ruskin, chief international strategist at Deutsche Bank AG.