(Bloomberg) -- Emerging-market stocks and currencies extended gains on Friday as the latest sign of a cooling US economy added to bets on further rate cuts by the Federal Reserve, while China’s stimulus measures continue to support riskier assets.

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The MSCI index for emerging stocks gained 1.2%, bringing its weekly rally to 6.4%, the biggest since November 2020. The index for developing currencies gained 0.4%.

The Fed’s preferred gauge of underlying US inflation gained moderately in August, with the core personal consumption expenditures price index rising 0.1%, the least in three months. At the same time, China’s stimulus measures continue to lift risk sentiment for emerging markets.

“It’s been a good rally with the China stimulus announcement this week lighting up risk sentiment,” said Gordian Kemen, head of emerging markets sovereign strategy at Standard Chartered Bank. The PCE data also helped, though the impact is fairly small, he added.

In the past 10 days, emerging-market investors have seen their biggest demands met in quick succession. After the Federal Reserve delivered a larger-than-anticipated cut to its interest rates, China followed up with multiple rate reductions, relaxation of bank reserves, and a specific program to support equity markets.

“This stimulus has brought back China onto investors’ radar,” said Rajat Agarwal, an equity strategist at Societe Generale SA. “China’s equity fundamentals were gradually normalizing, but the stimulus, including that targeted at the stock market, should help restore the missing confidence in the market.”

In the currency market, Chile’s peso led gains as traders added to long positions, with copper prices above $10,000 a ton on the back of China’s stimulus. Asian currencies followed, with the South Korean won and Taiwanese dollar outperforming. The Malaysian ringgit rose to the highest level since June 2021.

In credit markets, Sri Lanka bonds outperformed peers as the nation’s central bank governor Nandalal Weerasinghe said the country is in the final stage of debt restructuring.

Senegal’s sovereign dollar bonds tumbled the most among developing nations on Friday after the government announced a probe into the previous administration for painting an unrealistic picture of the country’s finances.

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