Stocks rose, led by emerging markets, as China unveiled details of its economic policy changes and investors speculated the Federal Reserve will continue stimulus. The yen and dollar slid against most peers while oil capped its longest streak of weekly losses since 1998.
The MSCI Emerging Markets Index gained 1.4 percent at 4:30 p.m. in New York, its best gain in almost two months, as the iShares China Large-Cap ETF climbed 4.4 percent for its biggest rally since July. The Standard & Poor’s 500 Index climbed 0.4 percent to 1,798.18, closing at a record for a third straight day. The 10-year Treasury yield rose, paring its weekly decline. Japan’s currency fell 0.2 percent to 100.25 per dollar, the weakest level in two months. Oil ended little changed at $93.84 a barrel, capping a sixth weekly decline.
China laid out economic reforms to sustain the nation’s expansion, saying it will allow more private investment in the state sector and pledging to loosen its one-child policy. Janet Yellen, the nominee for chairman of the Fed, signaled during her Senate confirmation hearing yesterday that she’ll maintain record monetary stimulus until the economy is stronger.
“Many things are coming together that are making people feel more optimistic about China,” Paul Zemsky, the New York-based head of asset allocation at ING Investment Management which oversees $190 billion, said by phone. “There were a lot of concerns about China’s ability to sustain growth over the next 10 or 15 years.”
The emerging-markets index rose for a second day after sliding for 10 straight sessions, its longest losing streak since 2006. The iShares exchange-traded fund tracking Chinese companies climbed 4.4 percent to $38.44, a one-month high.
China is seeking to balance finding new sources of growth with sustaining the Communist Party’s grip on power as President Xi Jinping faces challenges from debt to demographics. Couples may have two children if either parent is an only child, according to the Communist Party policy decision published today by the official Xinhua News Agency. The document, covering 60 measures, fleshes out a communique issued Nov. 12 after a four-day party conclave in Beijing.
Samsung Electronics Co. helped led gains in the emerging-markets measure, driving technology shares up 1.4 percent as a group. The world’s largest maker of handsets plans to release a Galaxy smartphone next year with a three-sided display that wraps around the edges, two people familiar with the plans said yesterday. The stock rose 2.7 percent in Seoul, the most since August. Benchmark indexes in India, South Korea, Chile and Argentina also jumped more than 1 percent and Brazil’s Ibovespa jumped 2.3 percent, the most in almost two months.
The S&P 500 extended its all-time high. The index has surged 26 percent this year, heading for its biggest annual gain in a decade. It climbed 1.6 percent in the past five days, capping a sixth straight weekly gain for its longest rally since February.
Exxon Mobil Corp. increased 2.2 percent after Berkshire Hathaway Inc. reported a stake in the oil company valued at about $3.7 billion, the largest new holding since Warren Buffett’s company added International Business Machines Corp. in 2011. FedEx Corp. climbed 1.6 percent after billionaire investors George Soros and John Paulson took positions. Fannie Mae and Freddie Mac jumped more than 6 percent as Bill Ackman’s hedge fund disclosed stakes in the government-backed mortgage insurers. Interpublic Group of Cos. fell 1.9 percent as WPP Plc said it’s not planning a takeover.
Factory production in the U.S. rose more than forecast in October, indicating the partial government shutdown did little to halt the pickup in manufacturing at the start of the fourth quarter. The 0.3 percent advance at factories followed a 0.1 percent gain the prior month and exceeded the 0.2 percent median projection in a Bloomberg survey, figures from the Federal Reserve showed. Total industrial production fell 0.1 percent as output at mines and utilities declined. Another report from the New York Fed showed manufacturing unexpectedly contracted this month.
Yellen said during her hearing that it’s important that policy makers do not remove support for the U.S. economy too soon given the limited range of tools available to the Fed, which has to promote a “very strong recovery.”
The Federal Open Market Committee probably will wait to taper its bond buying to $70 billion at its March 18-19 meeting from the current pace of $85 billion a month, according to the median estimate of 32 economists in a Bloomberg survey Nov. 8.
The Stoxx Europe 600 Index has gained 15 percent this year and reached a five-year high on Nov. 11. Vivendi SA advanced 2.8 percent today after the Paris-based company said it will spin off its French phone carrier SFR by July 2014 and posted third-quarter adjusted profit that beat analysts’ estimates. Royal Boskalis Westminster NV rose 1.3 percent after the world’s largest dredging company increased its 2013 profit forecast.
Safran SA slipped 3.9 percent after the French government, its biggest shareholder, sold a 4.7 percent stake in the manufacturer. Julius Baer Group Ltd., Switzerland’s third-largest wealth manager, dropped 1.6 percent after saying gross margins dropped at the end of October.
Japan’s currency weakened 0.5 percent to 135.27 per euro, the weakest this month, as it declined against all 16 major peers. The U.S. currency fell versus 13 of 16 most-traded counterparts, losing 0.3 percent to $1.3495 per euro.
The yen slumped 1.7 percent versus the dollar this week and was the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar was down 0.4 percent on the week and the euro gained 0.7 percent, according to the indexes.
Yields on 10-year Treasuries rose 1.5 basis points to 2.71 percent, paring their decline this week to four basis points.
Morgan Stanley, Goldman Sachs Group Inc., JPMorgan Chase & Co. and Bank of New York Mellon Corp. had their senior holding company ratings lowered one level by Moody’s Investors Service, which decided the U.S. government would be less likely to help them repay creditors in a crisis.
The yield on Morgan Stanley’s 4.1 percent subordinated notes due in May 2023 fell eight basis points to 4.56 percent, while the yield on JPMorgan’s 3.375 percent subordinated notes due May 2023 slipped seven basis points to 4.25 percent.
Yields on downgraded bonds typically rise after a rating reduction to account for the perceived deterioration of the issuer’s creditworthiness.