Emerging Stocks Rise, Led by Eastern Europe on Economy; Real Strengthens

Emerging-market stocks rose, with eastern European shares posting the biggest three-day rally in nine months, as faster-than-estimated growth in Europe’s economy and rising commodities eased concern exports will slow.

The MSCI Emerging Markets Index climbed 1 percent to 968 by 5 p.m. in New York. MSCI’s gauge of east European shares jumped 4.1 percent, extending its rise in the past three days to 10 percent. Russia’s Micex Index of shares rose 4.3 percent. The Mexican peso led gains in emerging market currencies, climbing 1.6 percent against the dollar as higher-than-forecast industrial production indicated the economy is recovering from the worst recession since the 1930s.

Gross domestic product in the 16 euro nations rose 0.2 percent from the fourth quarter, beating the 0.1 percent growth forecast of economists in a Bloomberg survey and spurring speculation the region’s economy will overcome spending cuts by indebted countries. The MSCI emerging index has retreated 7.6 percent in the past month on concern the Greek debt crisis may spread and slow the global economic recovery.

“We’re beginning to sniff around for opportunities again,” Michael Dicks, the London-based head of research at Barclays Wealth, which oversees about $227 billion, said in an interview with Bloomberg Television.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries dropped for a fourth day, falling 13 basis points to 2.78 percentage points, according to JPMorgan Chase & Co.’s EMBI Global Index. The so-called yield spread may fall to as low as 2.25 percentage points by the end of 2010, JPMorgan’s Joyce Chang wrote in a report yesterday.

‘Minimal Damage’

“The positive fundamental and technical support factors for EM remain intact, with minimal damage from the Euro area debt crisis,” wrote Chang, JPMorgan’s global head of emerging markets and credit research in New York.

Russia’s OAO GMK Norilsk Nickel climbed 4.7 percent as nickel prices advanced following the report on growth in the euro-area economy. OAO Gazprom jumped 3.8 percent as oil climbed above $76 a barrel before erasing its gain after a U.S. government report showed that inventories climbed for the 14th time in 15 weeks as refineries idled units.

Coal company OAO Raspadskaya rose 12 percent and power producer OAO OGK-4 jumped 15 percent after MSCI Inc. said the companies will be added to its benchmark Russia Index. New York- based MSCI, which announced semi-annual changes to its gauges yesterday, estimates more than $3 trillion of funds are benchmarked against its indexes globally. Changes to indexes can move share prices as passively managed funds buy and sell stocks to mirror the indexes.

Czech, Poland Rally

The Czech PX Index advanced 2.4 percent and the koruna strengthened 0.5 percent against the euro after the government said gross domestic product rose 1.2 percent from a year earlier, matching the median forecast in a Bloomberg survey of nine economists.

Poland’s WIG20 index climbed 1.1 percent. PZU SA, Poland’s biggest insurer, jumped 15 percent on its first day of trading in Warsaw after investors bid for nine times more shares than were offered in Europe’s biggest initial public offering since 2007.

Brazil’s Bovespa index climbed 1.2 percent. The nation’s retail sales rose 15.7 percent in March from a year earlier, the most since at least 2001. The increase exceeded the gain of 14 percent forecast by economists in a Bloomberg survey.

BM&FBovespa SA, the operator of Brazil’s exchange, led gains on the Bovespa index after first-quarter profit climbed 25 percent as increased trading of derivatives bolstered sales.

To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.

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