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Emerging-Market Stocks Gain for Third Day After U.S. Jobless Claims Drop

Emerging-market stocks rose for a third day as U.S. jobless claims fell to the lowest in more than three years, signaling strength in the world’s largest economy.

The MSCI Emerging Markets Index (MXEF) advanced 0.4 percent to 919.55 at the close in New York. Brazil’s Bovespa increased 1.2 percent to a one-week high. Hungary’s BUX Index fell the most in a week after the country lost its investment-grade rating at Standard & Poor’s in the second such cut in a month. South Africa’s All Share Index rose 0.8 percent.

Better-than estimated U.S. jobless claims and consumer confidence data boosted optimism for the world’s largest economy. Applications for unemployment benefits dropped to 364,000 last week, the lowest since April 2008. Confidence rose to a six-month high, according to the Thomson Reuters/University of Michigan sentiment index.

“We’ve seen encouraging economic news out of the U.S.,” said Robert Talbut, who helps oversee about $70 billion as chief investment officer at Royal London Asset Management Ltd. “I still believe that the necessary shifts will occur in Europe and that, in combination with more supportive moves elsewhere, 2012 can turn out to be a decent year for credit and equities.”

The MSCI emerging-market index has fallen 20 percent this year, exceeding an 8.3 percent drop in the MSCI World Index of developed nations, as Europe’s sovereign debt crisis stoked concerns about a global economic slowdown. The emerging-market gauge is valued at 9.3 times estimated profit, according to data compiled by Bloomberg.

Hungary Downgrade

The Bovespa rallied as Brazil’s unemployment rate fell to a record-low 5.2 percent.

Banco Bradesco SA, Brazil’s second-biggest bank by market value, added 1.3 percent after saying it plans to buy back as many as 15 million shares in the next six months.

Mexican stocks (MEXBOL) followed U.S. equities higher, gaining 1.2 percent. Cemex SAB (CEMEXCPO), the largest cement maker in the Americas, led gains with a 7 percent jump.

Hungary, the most-indebted eastern member of the European Union, was cut one step to BB+ from BBB-, S&P said in a statement yesterday, citing a lack of predictability on Hungary’s economic policies. The International Monetary Fund and the European Union suspended talks on an aid package to Hungary last week on concern that the government’s plans for a central bank law may curb monetary-policy independence.

“The S&P sovereign rating downgrade to junk probably means that an IMF program is now off the table,” Benoit Anne, the London-based head of emerging-markets strategy at Societe Generale SA, said today by e-mail. “Given the severe diplomatic crisis between the Hungarian authorities and the IMF, we believe that the chance of an IMF program is quite limited at this stage, something which is not yet reflected in the pricing in HUF assets.”

The Bux Index (BUX) lost 0.8 percent, the most since Dec. 14.

Old Mutual

Old Mutual Plc (OML), South Africa’s largest insurer, added 1.7 percent. The company may pay a special dividend of at least 15 pence per share and its stock could rise next year following the sale of Nordic units, according to Risto Ketola, an analyst at Standard Bank Group Ltd.’s SBG Securities.

The Hang Seng China Enterprises Index (HSCEI) declined 0.1 percent on concern Europe’s debt crisis will worsen after lenders in the region sought more funds than estimated from the European Central Bank.

“Market volatility will continue while Europe sorts out its debt crisis,” said Jonathan Ravelas, chief market strategist at Manila-based Banco de Oro Unibank Inc. “As long as Europe’s debt crisis isn’t resolved there’s the possibility of a contagion.”

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell three basis points, or 0.03 percentage points, to 412, according to JPMorgan Chase & Co.’s EMBI Global Index.

To contact the reporters on this story: Ian Sayson in Manila at isayson@bloomberg.net; Zachary Tracer in New York at ztracer1@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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