Emerging-market stocks rose, erasing a weekly drop, after U.S. jobs data triggered bets the Federal Reserve will cut stimulus at a slower pace. OAO Gazprom drove gains in commodity companies as metals and oil advanced.
The MSCI Emerging Markets Index added 0.8 percent to 937.30, bringing its weekly advance to 0.1 percent. Russia’s Micex Index increased to a two-week high as Gazprom surged 2.1 percent, while Chinese equities climbed on their first day of trading after a weeklong holiday. Brazil’s Ibovespa capped its first weekly gain in 2014 as real-estate companies rallied. The Philippine peso rose the most in four months after the central bank signaled it’s moving closer to raising borrowing costs.
Equities advanced as data showed the U.S. unemployment rate dropped to the lowest level since October 2008, while payrolls rose less than projected in January. Broad-based improvement in job growth is needed to help generate bigger wage gains and spur the consumer spending that accounts for almost 70 percent of the economy. The gauge for stocks in developing nations has slid as much as 16 percent since May 22, when the U.S. central bank signaled its asset-buying program could be trimmed if the economy showed sustained improvement.
“The U.S. market is on a recovery path and emerging markets perform well in this environment,” Julie Dickson, who helps manage $75.3 billion at Ashmore Group Plc, said in an interview at Bloomberg headquarters in New York. “Demand for exports from emerging markets is picking up as the global economy recovers.”
The worst isn’t over for emerging markets after the benchmark stock index sank to a five-month low and currencies tumbled, said Templeton Emerging Markets Group’s Mark Mobius.
The outlook from Mobius, a consistent advocate of emerging markets who’s been investing in the countries for more than 40 years, contrasts with that of Jim O’Neill, who created the BRIC moniker for the four largest developing economies and said this week that the rout created a buying opportunity.
“The negative sentiment is pretty much in place so you can expect a lot more selling,” Mobius, 77, who oversees more than $50 billion in developing-nation assets as an executive chairman at Templeton, said in an interview from Rio de Janeiro today. “We are looking but actually not buying at this stage. Prices can come down or take time to stabilize.”
The iShares MSCI Emerging Markets Index exchange-traded fund added 0.6 percent to $38.73. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, retreated 2.9 percent to 26.47.
Brazil’s Ibovespa gained as homebuilder Gafisa SA jumped on plans to have its two main operating units “working as two separate publicly traded companies.” The nation’s swap rates extended their weekly drop to the biggest since September as slower than forecast inflation added to speculation that the central bank will limit further increases in borrowing costs.
Russian stocks extended their weekly advance as Gazprom gained and the ruble strengthened before the Winter Olympics start in Sochi today. BNY Mellon filed for Gazprom’s ADR admission to the Moscow Exchange, according to data on the bourse’s website.
The Shanghai Composite Index advanced 0.6 percent, erasing a loss of as much as 0.9 percent, amid a rally for technology and small-company shares. Goertek Inc., an Apple Inc. supplier, jumped the most in six weeks. China’s yuan fell to the lowest level this year after the central bank cut the currency’s reference rate and reports indicated growth is moderating in the world’s second-biggest economy.
Indian stocks climbed, led by metals and pharmaceuticals producers, narrowing a weekly loss in the benchmark index. Tata Steel Ltd. rallied 6.4 percent, sending the S&P BSE India Metal Index to its steepest gain since October. Drugmaker Sun Pharmaceutical Industries Ltd. had the sharpest advance in two weeks. State Bank of India rose for a third day this week.
The Philippine peso also rallied after Finance Secretary Cesar Purisima said the currency was “undervalued.” Bangko Sentral ng Pilipinas’ policy stance is “more cautious” and the scope to keep interest rates on hold has narrowed from last year, Governor Amando Tetangco told Bloomberg Television today.
The premium investors demand to own emerging-market debt over U.S. Treasuries fell one basis point, or 0.01 percentage point, to 343 basis points, according to JPMorgan Chase & Co.