Investors Continue Selling Emerging Markets Even After Rate Hikes

Markets are waging war against central bankers.

After initially rising, U.S. stock futures sold off sharply as selling returned to emerging markets, reversing gains in currencies that were boosted by the Turkish central bank’s sharp rate hike.

South Africa on Wednesday followed Turkey’s rate hike with a half percentage point boost, taking its repo rate to 5.5 percent. Turkey surprised markets with a massive hike, taking its benchmark to 12 percent from 7.75 percent late Tuesday. This came on the heels of a rate hike in India on Tuesday, which helped steady markets ahead of Turkey’s rate decision.

The latest rout comes on a day that the Fed is widely expected to announce it will taper its bond buying program by another $10 billion, taking it to a $65 billion monthly program. Traders say the Fed’s move away from the easy money policy has aggravated the situation in emerging markets and has caused market readjustments across the globe in anticipation of rising U.S. interest rates.

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