Emerging Stocks Rise as Gold Producers Rally on Fed Bets

Emerging-market stocks rose for a third day as gold producers followed the precious metal higher on speculation the Federal Reserve will maintain the pace of economic stimulus. Brazil’s real climbed to a four-month high.

The MSCI Emerging Markets Index added 0.3 percent to 1,033.97, after jumping to the highest level in five months yesterday. AngloGold Ashanti Ltd. and DRDGold Ltd. (DRD) drove South Africa’s benchmark equity index to a record, while the Philippine Stock Exchange Index led gains among developing-nation gauges. Russia’s Micex Index (INDEXCF) slumped 1.3 percent as oil companies plunged. The real strengthened on speculation Brazil’s central bank will raise its target rate next month.

Gold surged in New York and the U.S. dollar tumbled on bets disruption from the debt-ceiling debate will hamper growth and prompt the central bank to delay tapering stimulus. Federal Reserve Bank of Chicago President Charles Evans said the Fed should not begin reducing the pace of asset purchases as the data used to gauge the economy’s health stopped during the government shutdown. President Barack Obama signed into law the measure to fund the American government through Jan. 15, 2014, and extend U.S. borrowing authority until Feb. 7.

“It’s going to be stimulus, stimulus, stimulus,” Alan Gayle, senior strategist at RidgeWorth Capital Management, said by phone from Atlanta, said by phone. His firm oversees about $48 billion. “It does look like the market fixation on the government shutdown and debt ceiling is over now, and now it’s on to the next thing. There’s a growing consensus that tapering from the Federal Reserve is not likely to happen until March.”

Fund Outflows

The measure for stocks in developing nations has slid as much as 16 percent since May 22, when the Fed signaled stimulus could be trimmed if the economy showed sustained improvement.

Global investors withdrew $26 billion from emerging market bond funds between May 29 and Sept. 18, representing about 10 percent of their total assets, according to Barclays Plc, citing data from EPFR Global. The funds saw their first inflow in 18 weeks during the five-day period ended Sept. 25, before the redemptions resumed over the past two weeks through Oct. 9.

Nine out of 10 groups in the MSCI Emerging Markets Index gained, led by commodity shares. The benchmark gauge for developing nations has slid 2 percent this year to trade at 10.7 times projected earnings, compared with the valuation of 14.2 for the MSCI World Index, data compiled by Bloomberg showed.

The iShares MSCI Emerging Markets Index exchange-traded fund advanced 0.6 percent to $43.27. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, declined 6.5 percent to 21.75.

Brazil, Russia

Brazil’s Ibovespa (IBOV) snapped a six-day rally as steelmaker Usinas Siderurgicas de Minas Gerais SA tumbled. The real gained on speculation the central bank will raise the target rate to 10 percent next month after minutes of last week’s meeting said the pace of increases is appropriate.

Russian stocks fell the most among emerging markets as sliding crude oil pared appetite for shares in the world’s biggest energy exporter and a technical indicator showed gains this month were overdone. OAO Gazprom, the natural-gas export monopoly, and OAO Surgutneftegas, a Russian oil producer, tumbled more than 1.7 percent.

The FTSE/JSE Africa All Shares Index rose to the highest level since at least 1995. The gauge advanced for a sixth day, the longest winning streak since January 2012. AngloGold Ashanti and DRDGold added at least 2.6 percent.

China Coal

The Shanghai Composite Index (SHCOMP) fell to the the lowest level since Sept. 30. Shanghai Oriental Pearl (Group) Co. and Shanghai Lujiazui Finance & Trade Zone Development Co. tumbled after jumping at least 88 percent over the past two months. China Shenhua Energy Co. (601088) and China Coal Energy Co., the biggest coal producers, advanced.

India’s The S&P BSE Sensex (SENSEX) dropped as Tata Consultancy Services Ltd. (TCS), Asia’s largest software exporter by market value, and HCL Technologies Ltd. fell from records. Tata Motors Ltd. (TTMT) slid the most in two months.

The Philippine Stock Exchange Index climbed 1.2 percent to the highest level since Aug. 15. Benchmark gauges in Indonesia, Malaysia and Thailand also gained.

The premium investors demand to own emerging-market debt over U.S. Treasuries rose two basis points, or 0.02 percentage point, to 319 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

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

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