Stock markets in developing countries are recovering

Stock markets in emerging markets recovered some of their losses today after yesterday's sharp sell-off, but the rise in the dollar and concerns about global economic growth limited gains.

The MSCI index, which tracks emerging market markets, rose 1.2 percent today after posting its worst performance in more than two years yesterday as investors moved away from risky assets due to concerns that the U.S. economy would enter a recession, the balance sheets of major technology companies were below expectations, and geopolitical concerns caused investors to move away from risky assets.

MSCI's index of Asia-Pacific stocks outside Japan rose 1 percent, helped by a sharp recovery in Japan's Nikkei index.

FED EXPECTATIONS ARE INCREASING

Markets remain cautious, with investors looking at an 86% chance the Fed will cut interest rates by 50 basis points in September. That chance was 80% yesterday.

Easing monetary policy in the U.S. generally supports emerging market stocks and currencies.

“Large moves on stock markets usually mean investors are looking for answers to one or more questions. So while things may seem to be picking up, it's best to assume the situation will remain tense for some time,” said SEB economist Marcus Widen.

DOLLAR'S RECOVERY CREATED PRESSURE

The yen fell today after finding significant support from risk aversion yesterday, as the dollar's recovery continued to weigh on emerging market currencies.

While the Dollar/TL exchange rate reached a new historical peak of 33.55, the South African rand lost 0.2 percent of its value.