Emerging Stocks Rise to 3-Month as Europe Concerns Ease

Emerging-market stocks rose to the strongest level in almost three months as concern over Europe’s debt crisis eased and as better-than-estimated U.S. corporate earnings boosted the outlook for exporters.

The MSCI Emerging Markets Index (MXEF) climbed 1.5 percent to 967.44 in New York, its highest close since May 11. Brazil’s Bovespa (IBOV) index jumped as steelmaker Usinas Siderurgicas de Minas Gerais SA’s 12-month price target was boosted by Goldman Sachs Group Inc. (GS) Benchmark indexes gained more than 1 percent in China, Russia, South Korea and India.

Bank of Italy Governor Ignazio Visco suggested the European Central Bank may be willing to counter further signs of a slowdown by cutting interest rates, daily La Repubblica said. The 21 countries in the MSCI gauge send about 30 percent of their exports to the European Union on average, data compiled by the World Trade Organization show. Warren Buffett’s Berkshire Hathaway Inc. rose as profit beat projections. China regulators broadened measures to boost investor confidence.

“Investors appear to be less worried about a deep recession as a result of Europe’s troubles,” Greg Lesko, who helps oversee about $700 million at Deltec Asset Management in New York, said in a telephone interview. “U.S. corporate earnings have been a major positive, and China has been making efforts but growth there has been a mixed bag, so until that changes, it’s hard to feel this is a sustainable rally.”

China cut interest rates in June and July, the first reductions since 2008, and is encouraging local governments to boost investment as economists forecast 2012 growth will be the slowest in 13 years.

Kospi Index

Visco told La Repubblica in an interview published yesterday that markets initially misunderstood ECB President Mario Draghi’s Aug. 2 comments.

“Not only did the ECB not take any steps backward, but it took decisive steps forward to correct the functioning of monetary policy transmission, and therefore of the stability of the single currency,” he told the newspaper.

South Korea’s Kospi (KOSPI) index surged 2 percent, the biggest gain among benchmark indexes in emerging markets today, while the won rose 0.5 percent. The Shanghai Composite Index (SHCOMP) had its best two-day rally since May as regulators broadened measures to boost confidence in stocks.

The Bovespa index rose 1.9 percent despite a surprise quarterly loss by oil company Petroleo Brasileiro SA (PETR4) as indications of European easing boosted the outlook for Brazilian raw-materials exports.

Petrobras, Usiminas

Petrobras, as Brazil’s state-controlled producer is known, slumped 0.1 percent after reporting Aug. 3 a loss of 1.35 billion reais ($666 million), trailing analysts’ estimates for adjusted profit of 2.94 billion reais. Usiminas, as the Brazilian steelmaker is known, jumped 7.9 to a two-month high after Goldman hiked its 12-month price target to 9.8 reais from 8.5 reais.

Cia. Siderurgica Nacional SA, Brazil’s third-largest steelmaker, gained the most in nine months, advancing 7.5 percent to $11.22.

The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong gained 1.6 percent, while Taiwan’s Taiex (TWSE) index rose 1 percent.

The Micex Index jumped 1.3 percent in Russia. VTB Group, the nation’s second-biggest lender, increased 4.1 percent. OAO Mechel, Russia’s biggest coking-coal producer, gained 2.2 percent and steelmaker OAO Severstal rose 2.7 percent.

The WIG20 Index (WIG20) rose 1.8 percent in Warsaw. PKO Bank Polski SA (PKO), Poland’s largest bank, rallied 1.8 percent after it said first-half net income rose to 1.95 billion zloty ($590 million) from 1.84 billion zloty a year earlier.

Turkey, China

Turkey’s ISE National 100 Index (XU100) gained 0.4 percent, led by a 1.9 percent rise in Turkiye Is Bankasi AS (ISCTR), the country’s biggest bank by assets. The FTSE/JSE Africa All Share Index (JALSH) added 0.6 percent in Johannesburg.

The Shanghai Composite rose 1 percent, taking its two-day rally to 2.1 percent. China plans to let workers choose for as much as 30 percent of their wages to be paid in the shares of their publicly traded employers. The stock used to pay employees must be acquired from the secondary market, according to draft rules posted on the China Securities Regulatory Commission’s website yesterday.

The BSE India Sensitive Index added 1.3 percent and Vietnam’s VN Index gained 1.2 percent.

Samsung Electronics Co. (005930), which got 35 percent of its sales from America and Europe last year, advanced 4.4 percent in Seoul, the most since July 27. The stock has the biggest representation on the MSCI Emerging Markets Information Technology Index, which led gains in the broader emerging-market gauge.

HTC Corp. (2498), Asia’s second-largest smartphone maker, fell 6.9 percent in Taipei to its lowest level since February 2010, after forecasting revenue that missed analyst estimates.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell five basis point, or 0.05 percentage point, to 319 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

To contact the reporters on this story: Jason Webb in London at jwebb25@bloomberg.net, or Leon Lazaroff in New York at llazaroff@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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