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US Diplomacy Calms Emerging Markets as Israel Stocks Rebound

Emerging-market currencies rose Monday as investors follow diplomatic efforts from the US and its allies to contain the war in the Middle East.
Bloomberg
By Bloomberg
16 Oct
Protests after Hamas attack on Israel epa10910436 A Palestinian supporter chants during a protest in response to the conflict between Hamas and Israel in New York, New York, USA, 09 October 2023. More than 700 Israelis were killed and over 2,000 were injured since the Islamist movement Hamas carried out an unprecedented attack on southern Israel on 07 October, the Israeli army said. According to Palestinian officials, more than 700 people were killed and nearly 4,000 were injured as a result of Israel’s retaliatory raids and air strikes in the Palestinian enclave. EPA-EFE/SARAH YENESEL 30783

Brazil’s real joined the rally in its peers at the open in the Americas as risk-on sentiment grew among investors. The gains come as US Secretary of State Antony Blinken steps up efforts to ensure humanitarian aid to people in Gaza and President Joe Biden considers a visit to Israel.

Israel’s benchmark equity index rose the most in two weeks and Egypt’s main gauge recaptured a record high. US officials are also intensifying their diplomatic efforts to warn Iran against entering the conflict, with many traders now betting the conflict won’t expand across the Middle East.

Read more: Blinken Returns to Tel Aviv in Bid to Contain War

Elections in Ecuador and Poland also helped boost assets. In Ecuador, the election of investor-favorite Daniel Noboa sent bonds rallying, with the notes due in 2035 jumping as much as 2.9 cents on the dollar to the highest in about a month.

Read more: Election of Pro-Business President Sends Ecuador Bonds Rallying

Meanwhile, Polish stocks, bonds and currency rallied after the pro-European-Union Civic Coalition neared victory in Sunday’s vote. Money managers including Goldman Sachs Group Inc. said the new government is likely to bring in prudent fiscal policies and lead the central bank to become more hawkish.

Read more: Poland’s Pro-EU Opposition to End Eight Years of Populist Rule

“The Civic Coalition promotes the return of a more EU-friendly stance and its victory would increase the prospect of an acceleration of the disbursement of European Union transfers to Poland,” Kevin Daly, a strategist at Goldman Sachs, wrote in a note. “We expect the central bank reaction function to now turn more hawkish.”

Poland Currency Gains on Vote | Zloty strengthens past 100-day moving average

The broad emerging-market indexes posted losses amid concern over a US plan for sweeping measures to restrict China’s access to advanced semiconductors and chipmaking gear. Asian chip stocks fell, driving the MSCI Emerging Markets Index to a decline of as much as 0.8%.

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