(Bloomberg) -- The prospect of rising inflation and U.S. Treasury yields may damp emerging-market sentiment, even as encouraging Chinese trade data points to a speedier global recovery from last year’s lockdown.

Exports from the world’s second-biggest economy soared in the first two months of the year, data showed Sunday, reflecting a recovery in external demand and providing a much-needed boost for risk assets after a turbulent start to March. Meantime, the U.S. Senate passed a $1.9 trillion stimulus package Saturday that may offer an additional spur to countries such as Mexico whose economies are most sensitive to U.S. growth.

Though equities may get a lift, anxiety remains high in the bond market after Federal Reserve Chairman Jerome Powell’s dovish message last week stopped short of trying to rein in the surging yields. An index of dollar-denominated debt in the developing world dropped for a fourth week in its longest losing streak since 2018. Local-currency notes also slid amid selloffs from Poland to Hungary and Mexico.

“All fixed-income assets face a challenging market as rates and inflation become more of a threat,” said Abdul Kadir Hussain, the Dubai-based head of fixed-income asset management at Arqaam Capital. “Emerging markets are no different. We have already seen outflows from emerging-market fixed-income funds, and I suspect that will continue in the near term.”

Inflation data this week will offer evidence of whether that caution is merited. Economists expect consumer prices to have picked up in nations including Taiwan, India and Brazil. Elsewhere, Peruvian policy makers will probably keep the nation’s key interest rate at a record low of 0.25%.

Inflation Watch

  • Taiwan’s consumer prices probably rose last month after declining in January, according to a Bloomberg survey before the report on Tuesday. Export figures the same day may reveal growth slowed in February after the island exported a record the previous month
    • The improving global trade outlook and backdrop for exports will probably buoy the Taiwan dollar, according to Gao Qi, a currency strategist at Scotiabank in Singapore
  • India’s consumer-price inflation probably accelerated further above the central bank’s 4% target, a Bloomberg survey showed. That could limit its capacity to keep monetary conditions accommodative
    • Those figures may put further upward pressure on Indian bond yields, which are already at a 10-month high
  • A reading of Brazil’s February consumer-price inflation on Thursday will be the last before the central bank meets later this month to decide on the key policy rate
    • Economists expect that inflation climbed last month
  • Mexico’s February inflation probably increased amid higher non-core prices, data on Tuesday may show
  • Argentina is likely to report another month of high inflation when it releases February figures on Thursday
  • Investors will also monitor Chile’s February inflation data on Monday, which will probably be slightly above the midpoint of the 3.0% +/- 1 percentage point target, according to Bloomberg Economics

Key Data

  • Chinese data due this week will provide another update on the nation’s economy after authorities announced a conservative growth target for this year at the National People’s Congress on Friday

    • After containing the pandemic and becoming the only major economy to expand in 2020, officials now want to address imbalances such as a dependence on investment in property and infrastructure funded by corporate debt
    • Aggregate financing numbers for February due between March 9 and 15 may show a slowdown due to seasonal factors. Inflation figures on Wednesday are expected to show consumer prices dropped for a second month in February, further enhancing the allure of Chinese bonds
  • Brazil’s January economic activity and retail sales figures will also be released next week, offering clues on the pace of a rebound in Latin America’s largest economy
    • In politics, traders will watch for progress on an emergency spending bill as it moves through the lower house. Jitters over fiscal spending have contributed to the real becoming the worst-performing currency in emerging markets this year
  • Turkey’s January current-account deficit due Thursday may narrow
    • The lira has posted losses for two straight weeks
    • READ: Economist Who Called 2018 Turkey Crash Sees New Boom, Bust
  • South Africa will report its fourth-quarter current-account surplus on Thursday, which is forecast to have narrowed
    • The country is also expected to report manufacturing production data on the same day
  • On Friday, Mexico will post January industrial production figures, which will give investors a better look at how activity is recovering
  • Peruvian policy makers will probably keep a dovish outlook on Thursday by holding borrowing costs at 0.25%, the lowest among major Latin American economies, according to a forecast by Bloomberg Economics

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