EMERGING MARKETS-Stocks retreat on tighter policy woes, Turkish lira falls further | Business

Most emerging market stocks fell on Tuesday after starting the week on a firm footing, on fears of tighter monetary policies, while the Turkish lira stretched declines to a second day after President Tayyip Erdogan pledged more interest-rate cuts. The lira fell as much as 16.74 against the dollar after Erdogan, in a Monday evening speech, sought to downplay the surge in annual consumer prices — which hit 73% last month — as just one of several problems for the economy that should begin to ease early next year.

Turkey’s currency is barrelling towards record lows last hit in 2021 when it was triggered by a series of unorthodox interest rate cuts amid sky-high inflation. Most other emerging market currencies slid after the greenback peaked to a 20-year high against the yen on worries of rising inflation. The Reserve Bank of Australia hiked interest rates by the most in 22 years and flagged more tightening to come, causing more damage to the appeal of riskier assets.

The hike in rates by the RBA was higher than expected, shocking equities and sending the Australian dollar and U.S. Treasuries higher while making EM assets less attractive. “Central banks have a history of panic and being behind the curve. Over the past decade, we’ve seen the RBA move too slowly when worried about inflation, move too low when worried about deflation and we now think that it’s moving back to inflation panic,” said Peter Esho, co-founder of Wealthi in Sydney.

“There’s no doubt that we have an inflation problem globally, but perhaps what’s even more important is confidence in central banks to control the problem,” Esho said. All eyes will be on the European Central Bank’s policy meeting and consumer prices data from the United States later in the week.

Emerging market stocks were also struggling to carry forward the positive momentum from the Monday, with the MSCI’s EM equities index down 0.9% and on track to give back nearly all its gains from the previous session. Russian stocks extended declines. The dollar-denominated RTS index shed 1.4%, while the rouble-based MOEX Russian index was 1.6% lower.

South African stocks fell 1%, while the rand edged 0.2% higher ahead of first-quarter gross domestic product figures. For GRAPHIC on emerging market FX performance in 2022, see For GRAPHIC on MSCI emerging index performance in 2022, see https://tmsnrt.rs/2OusNdX

For TOP NEWS across emerging markets For CENTRAL EUROPE market report, see

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