Emerging Market Assets Surge On Weak US Jobs


Posted June 17, 2016 by monexBMOsecurities

Emerging market assets rally as bets on June or July Fed hike fade.

 
Commodities, emerging market currencies and stocks have surged in the aftermath of the shock US jobs report which showed job creation slowing dramatically in May. The margin by which the actual number of jobs created missed the forecast prompted the market to rule out any chance of a rate hike being delivered in June and significantly reduced the odds of a July hike.

The prospect of low US interest rates continuing into the summer and beyond pushed the Russian ruble, South Korea’s won and others higher against the US dollar. Gold prices surged by over 2% on the release of the data while oil prices pushed towards $50 and beyond. Equity markets in Russia, Dubai, South Korea and the Philippines jumped on speculation that cheap money would flow into emerging market stocks.

“The price action we’re seeing in emerging markets vindicates our decision to eschew US stocks in 2016,” said Monica Freeman, chief markets strategist at Monex Financial. “We said at the beginning of the year that, despite the incessant rhetorical references to impending rate hikes in 2016, the Fed would be unable to raise rates much more than once because the economy will be too weak.”

Fund flows into emerging markets have surged in 2016 driven by renewed confidence in the commodities space. Those inflows reversed recently as hawkish statements from Fed officials and moderately improved economic data saw bets on a rate hike jump.

Monex Financial says it sees commodity prices and emerging market equities continuing to strengthen as investors realize the Fed is unable to deliver on its promises.

About Monex Financial
Monex Financial is a privately held, fully independent investment and wealth management leader, with retail operations based in Toronto, Canada and corporate trading division headquartered in Tokyo, Japan.

From our offices in Toronto the capital city of the province of Ontario and financial and business capital of Canada, we serve private individuals and families from N. America to Europe and with our corporate trading division strategically located in Tokyo, Japan, we have unrivalled access to Asia’s high yielding emerging markets, access to corporate resources, private equity and global mergers and acquisitions.
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Issued By Catherine Connor
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Categories Business , Finance , Industry
Tags emerging markets , monex financial , us jobs
Last Updated June 17, 2016