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The Fed and the Oracle of Delphi
Weekly investor research
22 April 2014
Emerging Markets (EM) performance has been relatively resilient in the face of US dollar strength on the back of stronger US
data and dovish comments from the Fed. EM fixed income benchmarks ended the week close to flat, currencies posted a
mildly negative performance, and EM equities had strong positive performance. In a relatively quiet week, the main focus was
the meeting between Russia and Western powers in Geneva over Ukraine, which produced a joint statement pledging to
disarm the militias in eastern Ukraine, though pledging is easier than implementation. An unambiguously strong set of
economic data in the United States set the tone for markets during a week when US company earnings were also stronger
than expected. Into this mix, Fed Chairwoman Janet Yellen added fuel by issuing a very dovish message. These factors helped
to revive momentum in the US equity market, taking the S&P 500 up 2.26% over the week, while the US Treasury curve bear
flattened. The 5-year Treasury underperformed with yields rising 10 bps to 1.72%. The US dollar index (DXY) advanced 0.64%.