Emerging Markets: A Volatile Year Reflects in Subdued Stocks and Currencies

Emerging market stocks and currencies struggled at the end of the year as U.S. rate cut prospects dwindled. Turkey's tax hikes and record-low lira marked regional challenges, while the dollar's strength hit emerging assets. Mixed performances varied across European and Asian markets with Hungary's stocks leading.

Emerging market stocks and currencies faced a lackluster trading day on Tuesday, morning reports indicated, positioning them for their weakest quarterly results since 2022. The stagnation comes amid expectations for fewer U.S. interest rate cuts, ending a tumultuous year for these assets.

According to MSCI stats at 0915 GMT, emerging market stocks fell by 0.3%, while their currency counterparts remained stable. These indexes are on track for 8.1% and 3.6% fourth-quarter declines respectively, marking their most significant drop since 2022. The light trading on the year's last day mirrored closures throughout emerging Europe for New Year's holidays.

On a regional note, Turkey's lira reached historic lows as the government announced a 6% tax increase on fuel. This caused unrest despite assurances from the finance minister that the hikes wouldn't disrupt inflation goals. The Russian rouble, by contrast, gained 3.2% but remained down 20% year-on-year.

(With inputs from agencies.)