Emerging Stocks Rise to Two-Week High as Automakers Surge
Emerging-market stocks climbed to a two-week high as the U.S. unemployment rate unexpectedly fell to the lowest in more than 3 1/2 years, boosting appetite for riskier assets.
The MSCI Emerging Markets Index (MXEF) rose 0.4 percent to 1,009.16, the highest since Sept. 19. Brazil’s Bovespa index gained with homebuilder Cyrela Brazil Realty SA Empreendimentos e Participacoes contributing most to the increase. Russia’s Micex Index jumped 1.4 percent after the central bank left its key rate unchanged. Equity indexes in Poland, Turkey and Mexico also advanced. The rand was at the lowest level versus the U.S. dollar since April 2009 as strikes spread in South Africa.
The jobless rate in the U.S. dropped to 7.8 percent in September, the lowest since January 2009, and hourly earnings climbed more than forecast. Developing-nation equities rose on signs a recovery in the U.S. labor market will stoke demand for products from the developing nations as the 21 countries in the MSCI gauge send about 13 percent of exports there, according to World Trade Organization data.
The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF (EEM) tracking developing-nation shares, was little changed while the Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, dropped 2.8 percent.
The Bovespa increased 0.2 percent, gaining for the first time in four days. Cyrela rose 4.3 percent as Brazil lowered the interest rate in its housing program known as Minha Casa Minha Vida to 7.16 percent from 8.16 percent.
European Central Bank President Mario Draghi pledged yesterday to buy government bonds and help ease borrowing costs in the region. Federal Reserve minutes released yesterday signaled the central bank is linking its outlook for near-zero interest rates to specific economic conditions such as unemployment.
Russian stocks snapped three days of declines with energy companies OAO Inter RAO UES and OAO Tatneft (TATN) gaining more than 2 percent. Bank Rossii kept its refinancing rate at 8.25 percent today, a decision forecast by 19 of 22 economists in a Bloomberg survey.
“Risks of a significant slowdown” from a tighter monetary policy after the central bank raised rates last month are “small,” policy makers said in a statement today.
Inter RAO UES
Russia, the only major emerging market to raise interest rates this year, is struggling to keep a lid on inflation after droughts in the U.S. and locally drove up food costs. The government’s top priority is fighting inflation even at the expense of short-term growth, President Vladimir Putin said on Oct. 2 at an investment conference in Moscow.
Inter RAO UES, the Russian state-controlled power generator and exporter, gained 3.4 percent in Moscow, the biggest leap since Sept. 14.
Turkey’s ISE National 100 Index climbed 0.7 percent on expectations the violence on the Syrian border that killed five people two days ago won’t escalate.
Besiktas Futbol Yatirimlari Sanayi & Ticaret AS (BJKAS), the merchandising unit of Turkish sports club Besiktas, rose 1.7 percent after a report it is in talks with banks for a $85 million loan.
The Hang Seng China Enterprises Index (HSCEI) of mainland companies rose 1.2 percent to the highest since May 15 while markets in China remained closed today for holidays. Indonesia’s Jakarta Composite Index (VXEEM) added 0.9 percent, climbing to a record high. The BSE India Sensitive Index sank 0.6 percent, retreating for the first time in five trading sessions.
The National Stock Exchange of India said 59 erroneous orders were responsible for a plunge and halt in trading today.
Orders entered by Emkay Global Financial Services Ltd. for a client that led to trades valued at 6.5 billion rupees ($126 million) caused the problem, NSE spokeswoman Divya Malik Lahiri said today by phone from New Delhi. Emkay’s Managing Director Prakash Kacholia wasn’t immediately available for comment.
The NSE, the nation’s largest bourse, controls more than 90 percent of India’s $28 billion equity derivatives market and handles 75 percent of the stock trades.
Brilliance China Automotive Holdings Ltd. (1114) advanced 5.9 percent in Hong Kong, the highest since Feb. 23. BMW’s car sales in China rose 59 percent in September, said Linda Croissant, a spokeswoman at the Munich-based company, easing investors’ concern the world’s biggest automotive market is slowing. China ZhengTong Auto Services Holdings Ltd. catapulted 6.1 percent in Hong Kong.
The extra yield investors demand to own emerging-market dollar bonds over U.S. Treasuries slid nine basis points, or 0.09 percentage point, to 286, according to JPMorgan’s EMBI Global Index.
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