Emerging-Market Stocks Surge to Highest Since August Before ECB Bank Loans
Emerging-market stocks jumped to the highest level since August on speculation the European Central Bank will provide funds to lenders, boosting the outlook for the global economy and appetite for riskier assets.
The MSCI Emerging Markets Index (MXEF) added 1.2 percent to 1,068.82 at the close in New York, the highest level since Aug. 4. Brazil’s Bovespa Index climbed the most in more than a week, led by crop producer Vanguarda Agro SA and lenders. India’s BSE Sensex Index (SENSEX) rose, snapping a four-day drop as Bharat Heavy Electricals Ltd. advanced.
European banks will probably tap the ECB for 470 billion euros ($632 billion) of three-year funds tomorrow, according to a Bloomberg survey of analysts. An index of executive and consumer sentiment in the 17-nation euro area rose for a second month in February, beating predictions. A U.S. gauge of consumer confidence jumped to the highest level in a year.
“The idea that the Europeans seem to be getting on with the job, so to speak, seems to be buoying investors,” David Rees, an emerging-markets economist at Capital Economics Ltd. in London said by phone. “We’ve seen a general improvement in the economic data everywhere, and that’s bolstered risk appetite and does really push capital out to the emerging markets.”
The MSCI World index of developed-country shares has gained 10 percent this year and trades for 13 times estimated earnings, above the 10.7 ratio for developing-nation stocks. Emerging- market stocks have gained 17 percent this year.
The Conference Board’s index of U.S. consumer confidence increased to 70.8 from a revised 61.5 in January, data from the New York-based private research group showed today. Economists predicted the gauge would climb to 63, according to the median estimate in a Bloomberg survey.
An index of executive and consumer sentiment in the euro zone rose to 94.4 from 93.4 in January, the European Commission in Brussels said. Economists had predicted a gain to 94, the median of 31 estimates showed.
The Bovespa (IBOV) rebounded from a two-week low, gaining 1.1 percent, the most since Feb. 16, as speculation Brazilian policy makers will continue to cut borrowing costs lifted financial stocks. Vanguarda Agro rose 7.3 percent.
Itau Unibanco Holding SA (ITUB4), Latin America’s biggest bank by market value, gained 2.7 percent, the biggest advance since Feb. 13. Banco do Brasil SA, Latin America’s biggest bank by assets, advanced 2.2 percent.
Hungary’s benchmark stock gauge rose 0.3 percent as lender FHB Mortgage Bank Nyrt. (FHB) climbed 3.5 percent. Hungary’s central bank kept its two-week deposit rate unchanged at 7 percent for a second month after a surge in the forint reduced pressure on policy makers and overshadowed flailing talks over an International Monetary Fund-led bailout.
Kredyt Bank SA (KRB), the Polish unit of KBC Groep NV, surged 18 percent on plans to merge with Banco Santander SA’s Bank Zachodni WBK SA. (BZW) Zachodni slid 1.7 percent. Polish stocks on the WIG20 Index added 0.3 percent.
India’s Sensex climbed 1.6 percent. Bharat, which manufactures power plant equipment, jumped 6.7 percent as India’s cabinet may approve a proposal to levy an additional 14 percent duty on imports of equipment.
Demand for oil may deteriorate after London-traded Brent oil futures rallied to a record high when priced in euros and pounds, according to Morgan Stanley. U.S. supplies probably gained to the highest level in five months last week, a Bloomberg survey showed before a report from the Energy Department tomorrow.
Crude oil for April delivery fell 1.9 percent to settle at $106.55 a barrel on the New York Mercantile exchange. The drop was the largest since Jan. 20.
“We do not see sustained gains from here, and the market is likely to pause,” said Andrey Kryuchenkov, an analyst at VTB Capital in London who predicts that oil prices will remain little changed this week. “The market has been overbought lately, with a substantial geopolitical risk premium in London, due to ongoing jitters over Iran’s controversial nuclear program.”
The extra yield investors demand to own emerging-market debt over U.S. Treasuries declined seven basis points, or 0.07 percentage point, to 362, according to JPMorgan Chase & Co.’s EMBI Global Index.