Developing Market Turmoil: China Hits Seven-Month Low Amid Grim Economic Outlook

Economic sentiment in developing markets, particularly China, turned negative as stocks hit a seven-month low. Investors, especially in Kenya, scrutinized government fiscal reform plans. China faced consumer inflation shortfalls and worsening producer price deflation. Meanwhile, Russia's regional elections indicated strong support for Putin, and the U.S. awaited a debate between Harris and Trump.

Sentiment across most developing markets soured on Monday with Chinese stocks hitting a seven-month low amid a grim economic outlook, while Kenyan investors parsed government fiscal reform proposals. The MSCI gauge of emerging market equities fell by 1.2% to a one-month low following two weeks of losses.

China's key indexes dropped over 1% each as August consumer inflation data failed to meet expectations and producer price deflation deepened. Hong Kong stocks fell 1.4%, with property shares hitting a record low. The yuan weakened by 0.4%, and bond yields aligned with the trend, reaching record lows. Analysts from Commerzbank suggested low core inflation would likely persist without significant fiscal reforms.

Elsewhere, Turkey's financial indicators remained flat while Fitch upgraded the country's rating, citing fiscal policy improvements. Kenya's finance minister proposed new revenue-boosting legislation following tax-related protests. In Russia, early votes suggested President Vladimir Putin's supporters would dominate gubernatorial elections despite ongoing conflict with Ukraine. Meanwhile, in Algeria, Abdulmadjid Tebboune won the presidential election. Upcoming events include a crucial debate between Kamala Harris and Donald Trump.

(With inputs from agencies.)