Hopes of recovery rekindled in the final months of the year

The world 's emerging markets have had a challenging quarter, but anecdotal signs point to a brighter outlook for year-end.

Hopes of global economic recovery have been raised again in the final months of the year. Illustrative photo. (Source: businesslive.com.za)

US-China tensions and the conflict in Ukraine have seen investment shift to like-minded countries - a sign that companies are betting on geopolitics .

Unfulfilled expectations

Against that backdrop, emerging markets just ended a volatile quarter, with the world's second-largest economy, China, slowing, US Treasury yields soaring and oil prices approaching $100 a barrel, leading to the worst decline this year in stock markets.

Global stocks recorded a recovery in the trading session on September 29. However, in the third quarter of 2023, stock markets saw $470 billion of asset value "evaporated" and a series of other currencies fell, while the risk premium with state guarantees still fluctuated at a three-month high.

As of now, it appears that expectations of a Chinese economic recovery as early as 2024 have faded and the outperformance of emerging economies relative to developed markets has failed to materialize.

New developments

Experts are currently observing developments that will appear in the fourth quarter of 2023, to make the most accurate forecasts about the market outlook for 2024.

China’s economy is stabilizing, Brent crude oil prices are likely to peak soon, and the dollar’s ​​rise has slowed after hitting a 10-month high, according to Citigroup strategists. Moreover, weak U.S. consumer spending data and a slower-than-expected rise in the Fed’s preferred inflation measure have raised hopes that U.S. monetary policymakers will “freeze” on interest rate hikes.

The US labor market will play a key role in the Federal Reserve's interest rate decision. Here, the strength of the labor market in the face of successive rate hikes has been one of the surprises this year, raising inflation expectations. While the Fed announced it would keep its core inflation target at 2%, market surveys showed 12 of 19 Fed officials support another rate hike before the end of 2023.

The volatility in US interest rates and the US dollar, which has had a major impact on the global economy, could spill over to emerging markets in the form of another stock sell-off. However, investors are hopeful that the recent signs of exhaustion in the US asset rally will continue, leading to a rebound in the fourth quarter.

In China, the stock market plunge has wiped out $1.7 trillion in shareholder wealth since early February 2023. However, unofficial data show signs of economic recovery, with improved industrial profit prospects promising new sources of revenue for businesses.

Source: https://baoquocte.vn/kinh-te-the-gioi-lai-day-len-hy-vong-phuc-hoi-nhung-thang-cuoi-nam-244367.html