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EMERGING MARKETS-EM stocks drop as polarised Fed blurs rate outlook
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EMERGING MARKETS-EM stocks drop as polarised Fed blurs rate outlook
Nov 4, 2025 2:36 AM

*

EM stocks down 1.1%, FX down 0.13%

*

Poland begins its two-day interest rate meeting on Tuesday

*

Czech election winner Babis signs coalition deal with

partners

*

Nigerian dollar bonds extend declines on Trump military

threats

By Nikhil Sharma

Nov 4 (Reuters) - Emerging Market stocks pulled back on

Tuesday, while currencies also wavered as conflicting messages

by U.S. Federal Reserve officials dimmed interest rate cut

expectations, weighing on risk appetite.

MSCI's index for regional equities fell 1.1% after

rising 0.6% in the previous session, tracking weaker global

sentiment after Fed officials on Monday offered competing views

on the economy, muddying the policy outlook at a time when key

data remains suspended amid a prolonged government shutdown.

After last week's cut, Fed Chair Jerome Powell signalled it

was likely the final reduction of the year, clouding hopes for a

December cut.

Markets are now pricing in a 67.2% chance of a rate cut in

December, down from 94% a week earlier.

A parallel index of EM currencies was down

0.13% - on pace for its fourth straight day of losses - against

elevated levels for the U.S. dollar.

FORINT COULD WANE AFTER CARRY TRADE SUPPORT

The Hungarian forint led currency losses in

Central-Eastern Europe, falling 0.8% after hitting a 17-month

high in the previous session.

With the country's main interest rate standing at the

European Union's joint-highest level of 6.50%, the currency has

benefited from a wider interest-rate differential that continues

to attract carry inflows, helping it outperform this year and

lifting its year-to-date gains to 5.6%.

"We've seen strong performance by the Hungarian forint in

last couple of months, mainly because of carry support... We do

not expect it to stay that way towards the end of the year,"

said Barry van der Laan, senior FX market strategist at Monex,

adding that the currency will lose against the euro despite the

huge rate differential.

Budapest stocks fell 0.46%, retreating after hitting

a record high on Monday. Equities have risen 35.16% YTD.

The Polish zloty was down 0.13% and the main stock

index sank 1.3%. As the National Bank of Poland kicks

off its two-day policy meeting on Tuesday, investors are largely

backing a quarter-point rate cut on Wednesday following

softer-than-expected October inflation data.

In the Czech Republic, investors expect the central bank to

maintain a pause to its easing cycle on Thursday at 3.5% as it

navigates wage pressures and the likelihood of looser fiscal

policy, particularly after an election win for former Prime

Minister Andrej Babis's populist ANO party.

NEW CZECH COALITION

On Monday, Babis' ANO party signed a coalition deal with

fringe right-wing allies, moving closer to regaining power on

promises of hiking spending, tax cuts, and opposing EU climate

and migration policies.

"If you have parties on the very right or very left side of

the spectrum, then you get into a situation where things become

unsteerable. He (Babis) needs support from the right side, which

is not really encouraging to Europe," Monex's van der Laan

added.

The currency crown was down 0.18% and Prague

equities lost 0.54%.

Elsewhere in EM, Nigerian dollar bonds extended their

decline, with 2050 maturity falling more than 1.1 cents to the

dollar following President Donald Trump's surprise threat over

the weekend to carry out strikes in the West African nation.

South Korean stocks dropped 2.4% as investors rushed

to book profits after a record-setting rally, driven by AI

optimism.

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see

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