Emerging Stocks Gain on U.S. as Russia Enters Bull Market

Emerging-market stocks climbed to a two-week high amid signs U.S. lawmakers will reach an agreement to avoid default. Russia’s RTS Index entered a bull market.

The MSCI Emerging Markets Index added 0.8 percent to 1,014.05. Russia’s RTS Index extended a surge from this year’s low to more than 20 percent as OAO Sberbank rose 2.1 percent. Polish lenders, led by Bank Pekao SA, jumped to the highest level in almost six years after Moody’s Investors Service raised the outlook for the industry. Brazil’s real led gains among the 31 major currencies tracked by Bloomberg after policy makers signaled they will keep the pace of rate increases.

The White House endorsed a short debt-limit increase with no policy conditions attached, signaling potential support for House Republicans’ plan for a monthlong reprieve from a default. The proposal by House Speaker John Boehner wouldn’t end the partial shutdown of the federal government. The plan would push the lapse of U.S. borrowing authority to Nov. 22 from Oct. 17.

“It’s all in the back of budget negotiations,” Chad Morganlander, a Florham Park, New Jersey-based fund manager at Stifel Nicolaus & Co., which oversees about $130 billion of assets, said by phone. “Any type of deal regarding the debt ceiling will embolden risk appetite.”

All 10 groups in the MSCI Emerging Markets Index gained today, led by consumer shares. The benchmark measure for developing nations has dropped 3.9 percent this year to trade at 10.6 times projected earnings, compared with the valuation of 13.8 for the MSCI World Index, according to data compiled by Bloomberg.

Emerging ETF

The iShares MSCI Emerging Markets Index exchange-traded fund advanced 2.4 percent to $42.64. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, decreased 11 percent to 24.97.

Brazil’s Ibovespa (IBOV) rose a second day as Cia. Brasileira de Distribuicao Grupo Pao de Acucar, the nation’s biggest retailer, jumped. The central bank yesterday lifted the target lending rate by a half-percentage point for the fourth time in a row, setting it at 9.5 percent. The real gained 1.2 percent as policy makers, repeating language used in the August decision, said the increase will ensure slower inflation next year.

Russia’s dollar-denominated RTS added 1.6 percent, while the Micex Index (INDEXCF) rose to the highest since February. OAO Sberbank, the nation’s largest lender, jumped to a five-month high. Poland’s WIG20 jumped the most since November 2011 as Bank Pekao, the second-biggest lender in Poland, increased 3.5 percent. Benchmark gauges in Turkey, Hungary and the Czech Republic advanced more than 0.4 percent.

Tata Motors

Indian (SENSEX) stocks advanced, with the benchmark index rising to a three-week high, before the start of the earnings season tomorrow. Tata Motors Ltd. (TTMT) jumped to a record after sales of Jaguar Land Rover climbed in September, sending a gauge of automakers to a nine-month high. Software maker Infosys Ltd. (INFO) increased for the fourth day. The rupee climbed the most in a week on speculation that policy makers will ease restrictions on foreign investors’ purchases of the nation’s debt.

China’s stocks fell the most in two weeks as financial companies slumped on concern earnings growth will slow. Citic Securities Co. (600030) and Haitong Securities Co., the nation’s largest-listed brokerages, slid more than 3 percent after Bank of America Corp. said brokerages will suffer from government efforts to encourage banks to offer asset-management products.

The premium investors demand to own emerging-market debt over U.S. Treasuries declined four basis points, or 0.04 percentage point, to 322 basis points, according to JPMorgan Chase & Co.

To contact the reporters on this story: Julia Leite in New York at jleite3@bloomberg.net; Maria Levitov in London at mlevitov@bloomberg.net; Ian Sayson in Manila at isayson@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net

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