Emerging market equities advanced on Friday as investors responded to Federal Reserve Chair Kevin Warsh’s positive assessment of artificial intelligence and its potential to support long-term economic growth. The gains followed a period of weakness in global technology shares, with markets also reassessing expectations for US interest rates.
The MSCI Emerging Markets Index rose around 1%, recovering some ground as sentiment improved across international markets. Asian equities also rebounded, with technology and semiconductor stocks recovering after recent selling linked to concerns about the cost of artificial intelligence investment and the risks associated with debt-funded expansion.
Speaking at the International Monetary Fund and World Bank annual meetings in Bangkok, Warsh described artificial intelligence as one of the most significant changes facing the US and global economies. He expressed confidence that the technology could improve productivity and support wealth creation over time, although he acknowledged that the transition would not be straightforward.
His comments provided support for markets that have become increasingly sensitive to developments in the AI sector. Companies supplying semiconductors, data centre equipment and other technology infrastructure have attracted substantial investment, but concerns have emerged over the scale of spending required and the ability of businesses to generate adequate returns.
Warsh said AI investment was already contributing to economic demand, while its longer-term effects on productivity and supply would take more time to emerge. This imbalance could create additional inflationary pressure in the near term, complicating the outlook for monetary policy.
The Federal Reserve chair did not provide a clear indication of the central bank’s next interest-rate decision. He reiterated that he would not prejudge upcoming policy meetings, leaving investors to assess the outlook using incoming economic data and other policymakers’ comments.
Nevertheless, markets reduced expectations of an imminent rate increase following his remarks. The prospect of a less aggressive near-term tightening path helped support risk appetite, particularly across equities that are sensitive to financing costs and global liquidity conditions.
Fidelity Emerging Markets Limited (LON:FEML) is an investment trust that aims to achieve long-term capital growth from an actively managed portfolio made up primarily of securities and financial instruments providing exposure to emerging markets companies, both listed and unlisted.
