(Bloomberg) -- Emerging-market assets kicked off March little changed as traders monitored a looming deadline for US tariffs on key trading partners, while Ukraine bonds fell on the fading prospects of a near-term peace deal.
An MSCI Inc. gauge for developing-nation currencies ended the day virtually unchanged from the open, as did the index for stocks. The indexes erased gains in the afternoon after President Donald Trump confirmed 25% tariffs on products from Mexico and Canada will begin Tuesday — sending the peso tumbling.
The Polish zloty and the Hungarian forint registered the biggest appreciations in a basket of peers tracked by Bloomberg after European leaders demonstrated support for Ukraine and pledged to boost military spending.
Ukraine’s dollar bonds slid the most since last year’s restructuring after a fiery exchange between Trump and Ukraine President Volodymyr Zelenskiy in the Oval Office late on Friday. The notes have rallied on growing expectations that Trump will quickly broker a peace agreement in Ukraine. While the latest setback to this plan soured sentiment, it didn’t uproot belief that a deal is still possible, even if it won’t come as rapidly as anticipated.
“Expectations were for a very easy and quick deal before market participants understood last week that it’s going to take time,” said Pavel Mamai, managing partner at Promeritum Investment Management in London. “Regardless of how the war ends, whether it’s a very strong peace agreement or whether a truce with risks, it’s going to be positive” for Ukraine’s bonds.
Zelenskiy’s clash at the White House with Trump was followed by a weekend summit by European leaders. They tried to keep the US engaged in Ukraine while also planning more action within Europe to help end the conflict started by Russia’s full-scale invasion three years ago. Zelenskiy said he’s willing to meet again with Trump if the US president invites him.
Ukraine’s zero-coupon dollar-notes maturing in 2035 fell more than 5 cents on the dollar to below 61 cents on Monday, the most since the debt started trading last September following a restructuring deal with creditors. The country’s bonds are pricing in about a 45% chance for a peace deal, compared with 55% at the market’s peak two weeks ago, said Guillaume Tresca, global EM strategist at Generali Investments in Paris.
Slovakia, another neighbor of Ukraine which is relatively shielded by its euro area membership, is likely to face elevated borrowing costs until the war comes to an end, the country’s debt management chief said in an interview.
Traders are also waiting for the National People’s Congress in China, which starts on Wednesday and might offer clues on possible stimulus to shield the economy from another trade war with the US. Gramercy Funds Management is expecting China to unveil an annual growth target of around 5% and a higher official deficit-to-GDP ratio.
In Latin America, Argentina bonds rallied after President Javier Milei said he’ll seek congressional support for a program he’s negotiating with the International Monetary Fund, spurring optimism over a possible agreement in the short term.
--With assistance from Sujata Rao, Konrad Krasuski and Peter Laca.