Emerging-market stocks rose after European Central Bank board member Juergen Stark said the region’s debt crisis will be under control in two years.
The MSCI Emerging Markets Index added 0.1 percent to 990.29 at 4:30 p.m. New York time after falling as much as 0.7 percent earlier today on concern Europe’s debt crisis is worsening. Brazil’s Bovespa index rose 0.9 percent as companies linked to domestic demand jumped on bets interest rates may be cut more than forecast. Mexico’s benchmark climbed 0.9 percent and Hungary’s BUX gauge slid 1.8 percent. China’s Shanghai Composite Index retreated 0.7 percent, the most in two weeks.
Stark said the crisis will be “under control, if not overcome” within two years and there will be no more need for further political actions. The index recovered from losses in Asia and Europe sparked by concern that Europe’s debt crisis is worsening. Italy’s parliament will vote on the 2010 budget report tomorrow as Prime Minister Silvio Berlusconi’s parliamentary majority unravels and borrowing costs surge.
“Everybody is waiting to see what will happen in Italy, whether Berlusconi will resign or not,” said Daniel Lenz, chief emerging markets strategist at DZ Bank AG in Frankfurt. “There needs to be a strong political commitment on installing the necessary fiscal austerity measures.”
The MSCI’s developing-nation index has dropped 14 percent this year, more than the 5.9 percent slide in the MSCI World Index of developed countries. The emerging-market gauge trades at 10.6 times estimated earnings, less than the 12 times for the MSCI World, according to data compiled by Bloomberg.
Two Berlusconi allies defected to the opposition last week, and a third quit last night. Six others called for Berlusconi to resign and seek a more broadly backed government in a letter to newspaper Corriere Della Sera. Berlusconi said yesterday he was confident he still had a majority.
Investor concern about Italy’s ability to cut the region’s second-biggest debt load sent the yield on the nation’s 10-year bonds to 6.7 percent today. That’s the highest in 14 years and close to the 7 percent level that drove Greece, Ireland and Portugal to seek bailouts. OTP Bank Plc., the biggest lender in Hungary, declined for a fifth day toward a one-month low. The stock fell 1.7 percent. Berlusconi bowed to domestic demands to water down a 45.5 billion euro ($62.6 billion) austerity package.
The Czech Republic’s PX slumped 1.8 percent and Poland’s WIG20 Index added 0.8 percent.
The Czech koruna led emerging-market currencies lower, sliding 0.7 percent against the dollar. Chile’s peso declined 0.7 percent while the ruble rose 0.5 percent.
“Central and eastern European, Middle Eastern and African markets remain heavily affected by developments in the euro zone and for this reason it is difficult to expect a meaningful and/or longer-lasting rally anytime soon,” Bartosz Pawlowski, a currency and fixed-income strategist at BNP Paribas SA in London, wrote in a report to clients today.
CPFL Energia SA, Brazil’s largest private-sector power distributor, gained 4.2 percent after it was rated “outperform” at Banco Itau BBA SA. Embraer SA rose 3.2 percent after saying it received 10 firm orders for its Embraer 190 and Embraer 195 jets from CIT Group Inc.
Industrias Penoles SAB, Mexico’s largest silver producer, advanced 2 percent as precious metals gained. Urbi Desarrollos Urbanos SAB , Mexico’s third-largest homebuilder, rose 0.4 percent.
Cnooc Ltd., China’s biggest offshore energy explorer, sank 2.2 percent in Hong Kong after a deal to buy Argentina’s biggest oil exporter collapsed. The failure of the deal means Cnooc may struggle to meet its production growth targets next year, according to Gordon Kwan, Mirae Asset Securities Ltd.’s head of regional energy research in Hong Kong.
Seoul Semiconductor Co., which makes light-emitting diodes products, surged by the daily limit of 15 percent after the official Xinhua News Agency reported China plans to phase out incandescent light bulbs.
Samsung Electronics Co., Asia’s biggest maker of chips, flat screens and mobile phones that earned about a fifth of its revenue from Europe last year, fell 1.2 percent. The European Union said Samsung and Apple Inc. were questioned by its antitrust regulators over the use of smart-phone patents. South Korea’s Kospi stock Index fell 0.5 percent.
Kepco Engineering & Construction jumped 15 percent after Yonhap News reported that Turkish Prime Minister Recep Tayyip Erdogan had asked for South Korea’s participation in setting up a nuclear plant. Kepco Engineering designs power plants.
In Taipei, HTC Corp. gained 2 percent after the smartphone maker’s October sales rose 39 percent from a year earlier.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose two basis points, or 0.02 percentage point, to 390, according to JPMorgan Chase & Co.’s EMBI Global Index.
The Markit iTraxx SovX CEEMEA Index of eastern European, Middle East and Africa credit-default swaps rose 4 basis points, or 0.04 percentage point, to 295, according to data provider CMA.