Emerging-market stocks advanced, led by Russia, as OAO Lukoil and OAO Gazprom paced a rally in energy companies. India’s equities and bonds climbed after the nation’s central bank relaxed liquidity curbs.
Stocks briefly pared gains as risk appetites in American capital markets diminished amid the U.S. budget impasse, pushing Treasury one-month bill rates to the highest since 2008. The MSCI Emerging Markets Index added 0.4 percent to 1,008.89. Russia’s Micex Index (INDEXCF) jumped to a seven-month high as Lukoil and Mechel increased more than 1.6 percent. Tata Motors Ltd. climbed to a record in Mumbai. Mexico’s IPC Index dropped to a one-month low as America Movil SAB (AMXL) tumbled.
President Barack Obama said the U.S. economy risks a “very deep recession” if Congress doesn’t raise the $16.7 trillion debt ceiling. Senate Majority Leader Harry Reid said the Republican-controlled House should vote to end the government shutdown and drop demands to change the Affordable Care Act, while House Speaker John Boehner said Reid and Obama should negotiate. Rates on one-month bills more than doubled to 0.33 percent, the highest since October 2008.
“The Congress has to resolve it,” Timothy Ghriskey, the chief investment officer at Solaris Group LLC in New York, which manages over $1.5 billion, said by phone. “But there’s no resolution yet, and it’s a big overhang for the U.S. markets and really any country that’s exposed to the U.S., either through its investments or trade.”
Investors also weighed prospects for growth after the International Monetary Fund cut its global outlook for this year and next as capital outflows further weaken emerging markets and warned that a U.S. government default could “seriously damage” the world economy.
Eight out of 10 groups in the MSCI Emerging Markets Index increased today, led by energy and financial shares. The benchmark measure for developing nations has dropped 4.4 percent this year to trade at 10.5 times projected earnings, compared with the valuation of 13.6 for the MSCI World Index, according to data compiled by Bloomberg.
The iShares MSCI Emerging Markets Index exchange-traded fund declined 1 percent to $41.35. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, surged 6.1 percent to 28.75.
Mexico’s IPC Index fell the most among major developing-nation gauges, as America Movil dropped 2.1 percent. Brazil’s Ibovespa fell for a second day, led by MMX Mineracao e Metalicos SA, the iron-ore producer controlled by Eike Batista. Mining company Vale SA slid after saying the market for iron ore will probably be oversupplied by 2015.
Russian stocks advanced for a fourth day as crude oil, the country’s main export earner, increased. Lukoil, the nation’s second-largest oil producer, surged to the highest level since July 2008. Gazprom posted the biggest jump in a month. Benchmark gauges in Turkey, Poland and the Czech Republic fell, while Hungarian shares rose.
Indian (SENSEX) stocks climbed to a two-week high as Reserve Bank of India Governor Raghuram Rajan rolled back an emergency step taken to shore up the currency, cutting the marginal standing facility rate to 9 percent from 9.5 percent after the rupee jumped from a record low in August. He raised the benchmark repurchase rate last month to fight elevated inflation. Tata Motors extended this year’s gain to 12 percent.
The Shanghai Composite Index (SHCOMP) added 1.1 percent, the biggest gain since Sept. 23. China’s markets were shut from Oct. 1 through yesterday for the National Day holiday. China Vanke Co. and Poly Real Estate Group Co., the nation’s biggest developers, advanced at least 4.6 percent.
Zimbabwe’s benchmark stocks index rose for a 16th day, its longest winning streak in a year, as investors speculated President Robert Mugabe’s government will put in place policies supportive of economic growth. The 73-member Zimbabwe Industrial Index extended gains since Sept. 17 to 12 percent.
The premium investors demand to own emerging-market debt over U.S. Treasuries declined two basis points, or 0.02 percentage point, to 330 basis points, according to JPMorgan Chase & Co.
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