Emerging Markets React Cautiously to Economic Data and Political Uncertainties

Emerging market stocks and currencies showed mixed performance as investors analyzed recent factory activity data and prepared for the economic impact of Donald Trump's presidency and potential prolonged high U.S. interest rates. The euro strengthened against regional currencies, while emerging markets anticipate challenges from U.S. policy changes.

Emerging market stocks and currencies showcased a mixed performance on Thursday, as investors analyzed factory activity data from several economies. The anticipation of policy shifts under Donald Trump's presidency, alongside concerns over likely prolonged high U.S. interest rates, added a layer of complexity to the market dynamics this year.

In Europe, the euro gained 0.7% against Poland's zloty after S&P Global Purchasing Managers' Index data revealed a continuing decline in the country's manufacturing sector in December. Similarly, the euro appreciated by 0.4% against Hungary's forint, despite a rising yet below-average PMI reading.

Across Asia, factory activity data indicated a slowdown, with China's stocks suffering their poorest New Year trading since 2016. This regional performance affected MSCI's EM equities index, which fell to its lowest in nearly four months. Presently, investors are warily eyeing fluctuating market trends and the impending effects of U.S. policy changes on global trade and inflation.

(With inputs from agencies.)