Clouds gather over emerging markets

Emerging markets had a good 2016. The MSCI Emerging Markets index outperformed developed-market stocks until November, and is now around 7% up for the year. China's recovery, which helped drive a commodities rebound, the easing recessions in Brazil and Russia and loose global monetary policy all bolstered sentiment. But emerging-market stocks "are unlikely to have it so easy" in 2017, says Capital Economics.

Trump's arrival is stoking concern over protectionism always a major headache for developing states because they depend more on trade than their industrialised counterparts. With Trump threatening to name China a "currency manipulator", geopolitical tension "will probably affect Asian markets already under pressure from rising US rates", note Roger Blitz and Elaine Moore in the Financial Times.

A higher yield on US assets draws capital away from emerging markets, a trend likely to accelerate if tightening happens faster than anticipated. China will be wary of racking up too much more debt, so it may withdraw some stimulus this year. Low valuations are bullish, however, and may help if political jitters settle. Russia could prove a bright spot given Trump's pro-Putin proclivities: he may soften Russian sanctions. Throw in the oil revival, says the FT's Eric Platt, and it's no wonder investors are already piling into Russian funds.

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