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Emerging Stocks Rise as Fed Maintains Pace of Stimulus Reduction

Emerging-market stocks rose for the first time in six days after the Federal Reserve maintained a gradual reduction of U.S. monetary stimulus that has buoyed demand for riskier assets.

Brazil’s Ibovespa rallied the most among the world’s major benchmarks as commodity producers gained. Russia’s ruble strengthened on prospects for a cease-fire in Ukraine as OAO Russian Grids advanced the most on the Micex Index. Brent crude climbed as Islamist militants seized an oil refinery in Iraq. The Shanghai Composite Index sank amid concern a property slowdown will hurt economic growth and new share sales will divert funds.

The MSCI Emerging Markets Index gained 0.4 percent to 1,047.53. The Fed trimmed its monthly bond buying by $10 billion for a fifth straight meeting, to $35 billion, keeping it on pace to end the program late this year. Policy makers predicted their target interest rate will be 1.13 percent at the end of 2015 and 2.5 percent a year later, higher than previously forecast.

“There was some fear in the market that tapering was going to be more aggressive and that rates would move higher quicker,” Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen Ball & Associates in Bethlehem, Pennsylvania, said by phone. “It was almost a little relief that it wasn’t more aggressive on the Fed’s part to cut back on their easing.”

The premium investors demand to own developing-nation debt over U.S. Treasuries increased three basis points to 271 basis points, according to JPMorgan Chase & Co. indexes.

Ukraine Crisis

The Ibovespa gained 1.7 percent in Sao Paulo. Petroleo Brasileiro, the state-controlled oil producer, contributed the most to the advance, rising 3.7 percent.

The developing-nation gauge has gained 4.5 percent this year and trades at 11 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has risen 4.7 percent in 2014 and is valued at a multiple of 15.2.

The Micex Index in Moscow rose for the first time in three days, climbing 0.5 percent, as discussions between President Vladimir Putin and his Ukrainian counterpart Petro Poroshenko bolstered speculation that they will agree to a cease-fire. Russian Grids jumped 5.3 percent. The ruble appreciated 0.8 percent.

Poroshenko today reiterated a plan to end fighting in the southeast of Ukraine after talks with Putin last night, Interfax reported. JPMorgan Chase & Co. raised Russian stocks to the equivalent of buy from the equivalent of sell, citing the “fading of the Ukraine crisis,” according to an e-mailed note today.

Chinese Stocks

Brent oil climbed to a nine-month as Islamist militants fought with Iraqi forces in a town near Baghdad and seized the Baiji refinery, the largest crude-processing plant in the country.

South Africa’s rand gained 1.7 percent, appreciating for the first time in four days, after a report showed the country’s current-account deficit unexpectedly narrowed in the first quarter. The shortfall shrank to 4.5 percent of gross domestic product in the three months through March from 5.1 percent in the preceding quarter, the South African Reserve Bank said.

The Shanghai Composite Index lost 0.5 percent, its second day of declines, amid concern a property slowdown will hurt economic growth and new share sales will divert funds.

Prices fell in 35 of the 70 cities last month from April, according to a statement by the National Bureau of Statistics today, the most since May 2012. Country Garden Holdings Co. slid 1.9 percent, declining to a five-week low. The Hang Seng China Enterprises Index (HSCEI) lost 0.2 percent.

China’s economy will continue to have a slow recovery,” Sasikorn Charoensuwan, head of research at Phillip Securities (Thailand) Pcl, said by phone from Bangkok.

To contact the reporters on this story: Zahra Hankir in London at zhankir@bloomberg.net; Gerrit De Vynck in Toronto at gdevynck@bloomberg.net

To contact the editors responsible for this story: Marie-France Han at mhan30@bloomberg.net; Michael Patterson at mpatterson10@bloomberg.net; Daliah Merzaban at dmerzaban@bloomberg.net Richard Richtmyer

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