Emerging Market Assets Subdued Amid Policy Decisions and Inflation Concerns

Emerging market assets remained largely unchanged on Monday following recent gains. Investors are focusing on policy decisions from major EMs and a key U.S. inflation report. Additionally, Sri Lanka's dollar bonds fell after electing a Marxist-leaning president. The market is also anticipating further policy easing by the U.S. Federal Reserve.

Emerging market assets were largely muted on Monday after recent gains, with a slew of EM policy decisions and a U.S. inflation print dominating investors' weekly watch list, while Sri Lanka's dollar bonds slid after electing a Marxist-leaning president.

Investors are monitoring crucial U.S. inflation and other data for clues on the economic outlook, following the Federal Reserve's 50-basis-point interest rate cut, which deepened a rush into risky assets. The MSCI index for EM stocks hit a nearly 10-week high in early trade before losing some gains, having marked its biggest weekly gain since Aug. 12 on Friday.

The currency gauge weakened slightly on the day after eight straight weekly advances. Multiple EM central banks, having preempted the Fed, will see upcoming policy actions closely monitored. Brazil notably raised rates last week by 25 basis points due to persistent inflation.

Mexico, Hungary, Czech Republic, and Sri Lanka are scheduled to release interest rate decisions this week. The Hungarian forint dipped 0.3% against the euro, while the Czech crown remained flat, with expected 25 basis points cuts. Sri Lanka's international bonds fell 3 cents due to concerns over a Marxist-leaning president possibly revisiting IMF bailout terms.

China's stocks rose for the fourth session, with 30-year treasury yields hitting record lows on hopes of new economic stimulus. Hong Kong shares reached a three-month high before closing lower. Major stock markets in the Gulf extended a rally from regional rate cuts but faced limitations from ongoing geopolitical tensions. Meanwhile, South Africa's rand hit a 20-month high against the U.S. dollar.

(With inputs from agencies.)