Emerging-market stocks rebounded from a one-month low after data showing a slowdown in Chinese growth bolstered bets on more economic stimulus. Brazil’s Ibovespa led gains among major equity gauges in the Americas.
The MSCI Emerging Markets Index added 0.3 percent to 1,002.50. The Shanghai Composite Index climbed after the biggest drop since March 10 while China’s interest-rate swaps touched a one-month low on bets the central bank will loosen monetary policy. The Ibovespa snapped a two-day slide as state-run oil producer Petroleo Brasileiro SA surged. Russia’s ruble led gains in major currencies as the U.S. signaled it won’t impose additional sanctions before talks on Ukraine tomorrow.
China’s expansion moderated to the weakest pace in six quarters and property construction plunged, testing the government’s commitment to keep reining in credit as risks mount of a deeper economic slowdown. The country will lower reserve ratios at “qualified” rural banks in order to provide more funds to agriculture-related industries, according to a statement on the government website today, citing a State Council meeting chaired by Premier Li Keqiang.
“When we look at China, we don’t see it falling apart,” Sean Lynch, Omaha, Nebraska-based global investment strategist at Wells Fargo Private Bank, which oversees about $170 billion, says by phone. “The market is encouraged by the fact that they’ll stand by if we see growth starts to fall off dramatically. There still are some levers that China can pull to help stimulate the economy, and that would be well received by the markets.”
Stocks also rose after Federal Reserve Chair Janet Yellen said the central bank has a “continuing commitment” to support the recovery even as policy makers now see the economy reaching full employment by late 2016. The U.S. economy continued to expand in most regions as businesses benefited from a bounce back from harsh winter weather earlier in the year, the Fed said separately on its Beige Book.
The iShares MSCI Emerging Markets Index ETF gained 1.3 percent to $41.63. The premium investors demand to own emerging-market debt over U.S. Treasuries fell 0.02 percentage point to 299 basis points, according to JPMorgan Chase & Co.
Brazil’s Ibovespa rose 1.5 percent as Petrobras drove a rally in commodity shares. Localiza Rent a Car SA gained after reporting first-quarter earnings that exceeded analysts’ estimates. Steelmaker Cia. Siderurgica Nacional SA jumped after announcing a plan to buy back as many as 67.9 million shares through May 23.
Russia’s Micex Index added 0.9 percent while the ruble trimmed this year’s slide. Envoys from Ukraine, Russia, the U.S. and European Union are scheduled to hold talks tomorrow in Geneva. Ukraine’s parliament today rejected a Russian call to send representatives of its eastern regions to the negotiations.
The Shanghai Composite Index extended its quarterly rally to 3.5 percent. The cost of the one-year rate swap, the fixed payment needed to receive the floating seven-day repurchase rate, slipped two basis points, or 0.02 percentage point, to 4.06 percent as of 4:48 p.m. in Shanghai. It reached 4.02 percent earlier, the lowest level since March 13.
The yuan in Hong Kong traded within 0.1 percent of a 14-month low after the central bank weakened the currency’s reference rate for a third day.