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Hungary central bank expected to hold rates steady

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Trump comments ease trade tensions

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European leaders back Trump's call for Ukraine ceasefire

By Niket Nishant and Johann M Cherian

Oct 21(Reuters) - Emerging market stocks crept higher on

Tuesday, trading around levels not seen since mid-2021 as a raft

of global economic developments supported investors' appetite

for risk, while Hungary came into focus ahead of its central

bank decision.

The Budapest SE index was flat early in the session

while the forint eased after hitting a two-week high

against the euro in the previous session.

The central bank is expected to hold rates at 6.5%, the

joint-highest in the European Union, to keep inflation risks at

bay despite mounting political pressure to ease.

"Governor Mihaly Varga will have an excellent opportunity to

firmly defend the independence of the National Bank of Hungary.

If the overall message is less hawkish or more dovish, it would

most likely unsettle carry trade players," said Piotr Matys,

senior FX analyst at In Touch Capital Markets.

A carry trade involves borrowing in a low interest rate

currency to invest in assets denominated in higher-yielding

currencies.

Meanwhile, shares of Hungarian oil and gas company MOL

fell 1.44%. A fire broke out at its main Danube

refinery south of Budapest, but it was contained and there were

no injuries, the company said.

Hungarian Foreign Minister Peter Szijjarto is set to visit

Washington on Tuesday. The country is expected to host a summit

between U.S. President Donald Trump and Russian President

Vladimir Putin, where the two are expected to discuss the war in

Ukraine.

Any breakthrough towards a ceasefire could bolster risk

appetite across emerging markets. European leaders issued a

joint statement with Ukraine on Tuesday backing Trump's call for

a ceasefire at present battle lines.

Ukraine's long-dated bonds were marginally higher.

Signs of easing trade tensions have already helped

sentiment, after Trump said he expects to reach a fair trade

deal with China.

China's Shanghai Composite index was up 1.36% and

the blue-chip CSI300 index was up 1.53%. Hong Kong's

Hang Seng Index was also up 0.83%.

ANALYSTS EXPECT SUSTAINED RALLY

MSCI's index tracking emerging markets equities

rose 0.22% and was last trading at its highest since June 2021.

The equivalent currencies gauge slipped 0.13%.

A slew of factors are expected to support the region's

assets in the coming months, including forecasts for U.S.

interest rate cuts that could weaken the dollar and encourage

investors to diversify.

"We think the EM equity rally can extend into the year-end

as macro trends and capital inflows remain supportive,"

Kamakshya Trivedi, chief foreign exchange and emerging markets

strategist at Goldman Sachs Research, wrote in a report.