Emerging-market stocks rose, paring earlier losses, as Greece made “good progress” on resolving its debt crisis and investors speculated the U.S. Federal Reserve would introduce further monetary stimulus.
The MSCI Emerging Markets Index rose 0.2 percent to 951.15 by 4:31 p.m. in New York. It had earlier fallen as much as 1 percent after Standard & Poor’s cut Italy’s credit rating. Turkey’s XU100 Index jumped 5.1 percent after its local-currency credit rating was raised to investment-grade by Standard & Poor’s. The Micex Index (INDEXCF) climbed 1.8 percent in Moscow as oil rose. The Brazilian Bovespa stock index fell on inflation concern.
Staying in the euro area is an “irreversible and fundamental national choice,” Greek Finance Minister Evangelos Venizelos said in a statement today. Venizelos made “good progress” in a second round of talks with the European Union and International Monetary Fund aimed at staving off default, the EU said in a statement. The Fed started a two-day Open Market Committee meeting.
“The FOMC meeting starting today will undoubtedly be investors’ key focus over the next two days, along with progress surrounding the Greek situation,” analysts at UralSib Financial Corp. in Moscow including Slava Smolyaninov wrote in an e-mailed report today.
Fed officials tomorrow will probably announce a program for monetary easing that will do little to help 14 million unemployed Americans find work, according to economists in a Bloomberg News survey. The Open Market Committee will decide to replace short-term Treasuries in its $1.65 trillion portfolio with long-term bonds, according to 71 percent of 42 economists in a Bloomberg News survey.
The EU statement said a “full mission” will return to Athens next week after Venizelos’s discussions in coming days at the IMF annual meeting in Washington. Greek government spokesman Ilias Mosialos said in a phone interview that Prime Minister George Papandreou wasn’t considering holding a referendum on whether his nation should exit the euro common currency, denying a report in Kathimerini newspaper.
Italy was lowered to A from A+ on concern that weaker growth and a “fragile” government mean the country won’t be able to reduce the euro-region’s second-largest debt load, S&P said.
Tam SA, Brazil’s second-biggest airline by market value, rose 2.5 percent to a two-month high in Sao Paulo after it said demand for domestic flights rose 0.8 percent last month from a year earlier while demand for international flights increased 8.3 percent. OGX Petroleo & Gas Participacoes SA, the oil company controlled by Brazilian billionaire Eike Batista, gained 2.1 percent, following crude prices higher.
OAO Lukoil, Russia’s second-biggest crude producer, gained 2 percent.
The Hungarian forint strengthened 1.4 percent against the U.S. dollar, the best performer among 25 emerging-market currencies. Turkey’s lira followed, climbing 1 percent. Brazil’s real gained 0.7 percent after reaching the lowest in more than a year yesterday. The nation’s consumer prices, as measured by the IPCA-15 index, rose more than economists forecast this month.
Chile’s peso sank 1.8 percent to the weakest level in almost eight months, after copper, Chile’s biggest export, slumped to the lowest since November. South Korea’s won dropped 1 percent to this year’s low on concern Europe’s debt crisis will spur an exodus from emerging-market assets.
The IMF cut its forecast for global economic growth and predicted “severe” repercussions if Europe fails to contain its debt crisis or if U.S. policy makers reach an impasse over a fiscal plan. The world economy will expand 4 percent this year and next, the IMF said today, compared with June forecasts of 4.3 percent in 2011 and 4.5 percent in 2012.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell six basis points, or 0.06 percentage point, to 402, according to JPMorgan Chase & Co.’s EMBI Global Index.
The Shanghai Composite Index rose 0.4 percent, climbing from a 14-month low, as investors speculated recent losses were excessive. The Shanghai index has slumped 13 percent this year, extending last year’s 14 percent plunge, as the government increased measures to cool inflation that’s at an almost three- year high. The gauge is valued at 11.3 times estimated profit, after reaching a record low yesterday, according to weekly data compiled by Bloomberg and dating back to January 2006.
The Philippine Stock Exchange Index lost 2.1 percent, the most since Aug. 9. Philippine stocks are one of the most “crowded” trades this year on a net foreign-buying basis, Credit Suisse Group AG said in a research note today.
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