Struggling emerging economies should be hoping for a recession in the US if it forces the Federal Reserve to reverse course and loosen monetary policy, David Lubin, Citi’s chief EM economist, writes for the Financial Times. Rapidly rising US interest rates and the strengthening USD have piled pressure on indebted emerging markets this year, locking them out of international capital markets, weakening their currencies, and pushing them closer to default. A pivot by the central bank would likely push investors back into EM assets due to falling US rates and a weakening greenback.

That’s a big if, though: The Fed has not given any indication that it would reverse course in the event of a recession. Despite rising fears of an economic contraction, officials have held the line and insisted that curbing soaring inflation remains the central bank’s overriding priority.

More economic turmoil in Turkey: Turkish debt just became junkier, after S&P Global cut the country’s credit rating deeper into junk territory due to the government’s ultra-loose fiscal and monetary policies. The ratings downgrade came as inflation hit nearly 84% y-o-y last month, according to the Turkish Statistical Institute — a level last seen in 1998 — and President Recep Tayyip Erdogan vowed to continue cutting interest rates to fall below 10% by year-end. Meanwhile, Turkish officials arrested eight suspects as part of an investigation into alleged market manipulation that preceded a plunge in equities, which Erdogan said last week was caused by “speculative moves,” according to Bloomberg.

Also worth noting:

• Eurozone inflation shows no signs of slowing: Inflation in the eurozone accelerated to 10% in September from 9.1% in August on the back of rising energy and food costs. (Eurostat, pdf)
• Israeli interest rates at 11-year high: Israel’s central bank hiked rates for the fifth meeting in a row, and telegraphed further increases in the coming months. (Bloomberg)
• Credit Suisse shares pared losses after plunging as much as 12% to a record low on Monday, after what was meant to be a reassuring memo from the bank’s CEO instead caused a panic selloff. (Bloomberg)
• Porsche shares slid as much as 1.8% below the price on their debut last week, as Europe’s biggest IPO in more than a decade falters on choppy markets. (Bloomberg)

THE CLOSING BELL-

The EGX30 was almost flat at yesterday’s close on turnover of EGP 915.82 mn (3.9% below the 90-day average). Local investors were net buyers. The index is down 18.9% YTD.

In the green: Rameda (+1.9%), TMG Holding (+1.8%) and EFG Hermes (+1.8%).

In the red: Orascom Construction (-4.5%), Credit Agricole (-2.1%) and Elsewedy Electric (-1.9%).