(Bloomberg) — Markets in three of the largest emerging economies got a boost after Turkey’s sovereign rating was upgraded, and as the outlooks for both Egypt and Nigeria were lifted.
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Egypt’s credit rating outlook was raised to positive from stable by Fitch Ratings, after the North African nation secured an international bailout. Egypt’s dollar notes due in 2047 were set for the highest in more than three weeks. Turkey’s five-year credit-default swaps — the cost to insure Turkish debt against default — headed for the lowest since February after the sovereign’s rating was upgraded by S&P Global Ratings. The ratings firm cited the government’s return to more orthodox economic policies.
“S&P’s credit rating upgrade over the weekend and no upside surprise to the April inflation print, should further improve the sentiment towards Turkish assets,” Deutsche Bank said in a note Monday. “We expect a significant acceleration in the performance of local bonds over the summer months.”
Nigeria’s credit rating outlook was also lifted by Fitch to positive, as reform progress since President Bola Tinubu’s assumption of power last year has been faster than anticipated.
Fiscal Pressures
Elsewhere in emerging markets, the forint has received some support since late April when S&P kept its credit rating and outlook steady for Hungary despite pressures on the budget. Slovakia also escaped a second downgrade in four months after Prime Minister Robert Fico’s government pledged to reduce the fiscal shortfall.
Read more: Credit Upgrades Top Downgrades in Eastern Europe 10 to 0 in Week
Wider sentiment remained upbeat Monday as a rally in Asian equities continued, with stocks listed in Hong Kong and Taiwan among leading gainers. Emerging-market equities rallied for a third day, up 0.6% by 1:29 p.m. in London.
A lighter calendar of economic data this week and a UK bank holiday Monday may be reducing volumes on some markets, with support still seen from revived bets on Federal Reserve rate cuts.
“European markets are holding on to this rate cut optimism amidst relatively quiet trading this morning, with equities posting modest gains and bond yields taking another leg down,” Rabobank said in a note Monday.
The shekel slid about 1% against the dollar, the most since mid-April, after Israel’s military told civilians to move out of parts of Rafah, a possible prelude to a long-expected attack on the Gazan city.
(Updates with background on eastern Europe, fresh prices)
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