Emerging Stocks Climb on Ukraine Cease-Fire as Real StrengthensNatasha Doff and Halia Pavliva
Emerging-market stocks advanced for the first time in five days after Russia and Ukraine reached a cease-fire agreement following all-night talks. Russian equities rose and Brazil’s real rebounded from a decade low.
London-listed depositary shares of retailer PJSC Magnit jumped 5.6 percent as Russia’s dollar-denominated RTS Index advanced to a two-month high. The ruble ended little changed after strengthening as much as 1.2 percent. The Ibovespa snapped a two-day decline as a report showed that Brazil’s economy contracted less than analysts had forecast. China Unicom (Hong Kong) Ltd. and China Telecom Corp. climbed more than 2.9 percent amid speculation the two companies may merge.
The MSCI Emerging Markets Index rose 1 percent to 971.19 in New York. The gauge had fallen 2.1 percent in four days as a standoff between Greece’s new government and its creditors over austerity conditions worsened. The measure has added 1.6 percent this year as the European Central Bank announced a $1.3 trillion stimulus plan and Brent crude rebounded more than 20 percent from the lowest price in almost six years.
“The rally will continue as folks want to move on,” Frank Braddock, senior portfolio manager at JHS Capital Advisors, which oversees $4 billion in client assets, said by phone in New York. “We already had an agreement that didn’t work. The market, however, is numb to this and the rally in Russian stocks will hold for some time. The conflict in Ukraine has been going for so long that folks are tired of it, they want to look forward, not backward.”
The premium investors demand to hold emerging-market debt rather than U.S. Treasuries dropped for the first time in four days, narrowing five basis points to 371, according to JPMorgan Chase & Co. indexes.
The leaders of Russia, Ukraine, Germany and France agreed on steps to stop fighting between government troops and pro-Russian rebels in eastern Ukraine. The cease-fire will start Feb. 15 and reaffirms some commitments from a failed September bid to end the conflict.
The collapse of previous cease-fires has stoked skepticism as to whether the new deal will hold. Months of fighting have killed more than 5,000 people, ravaged Ukraine’s economy and propelled Russia toward recession as U.S. and European sanctions exacerbated a collapse in the price of crude, the country’s major export.
“Sanctions and the oil price are still the most important thing for the Russian economy,” Anders Svendsen, an analyst at Nordea Bank AB in Copenhagen, said by phone. “The ruble will continue to be under pressure for the next few months if oil prices stay at these levels.”
The RTS gauge increased 3.6 percent, extending its advance from a low on Dec. 16 to 37 percent. Magnit, which reported financial results on Tuesday, rose for a sixth day inn London, the longest streak since July. The Ukrainian Equities Index surged 6.2 percent, the most since March 4, which was around the time Russia invaded Crimea. The ruble weakened to 65.27 per dollar.
The Tadawul All Share Index rose 1.4 percent in Riyadh. Crude demand is improving amid signs prices are stabilizing, the state-run Saudi Press Agency reported, citing Saudi Arabia’s Oil Minister Ali al-Naimi.
The Ibovespa surged 2.7 percent to a one-month high after the seasonally-adjusted economic activity index, a proxy for gross domestic product, fell less than forecast, bolstering the outlook for companies that depend on domestic demand. Hypermarcas SA, a maker of consumer goods, rose to a one-week high. The real climbed 1.6 percent a day after falling to its weakest level since October 2004. An increase in U.S. unemployment claims added to speculation that the Federal Reserve will refrain from raising interest rates.
In China, the Shanghai Composite Index added 0.5 percent as shares of consumer-goods makers advanced on prospects for increased sales during the Chinese new year holiday. The rally in phone companies contributed to the gain, even though China Telecom said it isn’t aware of any plan to merge with China Unicom.
All but one of the 10 industry groups on the emerging-markets index climbed, led by telecommunications and energy companies. The measure trades at 11.6 times the projected earnings of its members, data compiled by Bloomberg show. The MSCI World Index of developed-market stocks is valued at a multiple of 16.5.