Emerging-Market Stocks Rise Third Day as Fed Buoys Risk DemandElena Popina and Maria Levitov
Emerging-market stocks advanced for a third day as the Federal Reserve indicated that U.S. interest rates will rise more slowly than previously estimated, bolstering demand for riskier assets.
The MSCI Emerging Markets Index rose 0.8 percent to 956.73. A Bloomberg gauge of 20 developing-nation currencies increased 1.3 percent, advancing for the fourth time in five days. The Ibovespa rallied the most among the world’s biggest equity benchmarks as Banco Bradesco SA led Brazilian lenders higher.
Stocks and currencies extended gains after the Fed said an increase in benchmark U.S. borrowing costs “remains unlikely” at its April meeting. Policy makers also lowered their median estimate for the federal funds rate at the end of 2015 to 0.625 percent, compared with 1.125 percent in December forecasts.
While the Fed dropped from its policy statement an assurance that it will be “patient” in raising rates, “the market is still taking this as a sign that the Fed is going to be patient enough,” Nicholas Spiro, a managing director at Spiro Sovereign Strategy, a London-based investment consultancy firm, said by phone. “EM assets will benefit from this dovish statement.”
The Ibovespa rallied 2.6 percent. Banco Bradesco jumped 3.9 percent.
The Shanghai Composite Index rose 2.1 percent, climbing for a sixth day, and the yuan strengthened 0.3 percent against the dollar amid speculation China will step up efforts to boost growth in the world’s second-largest economy.
Policy makers are under pressure to step up stimulus after home prices fell in more Chinese cities last month than in January. Two interest-rate cuts in three months and the removal of property curbs have yet to revive an industry that remains a drag on the economy as Premier Li Keqiang set the lowest growth target in more than 15 years.
Israeli stocks rallied 1 percent to a record and the shekel strengthened for a third day as Prime Minister Benjamin Netanyahu’s party led in election results. Traders are the most bullish on the shekel in more than three weeks, according to three-month 25-delta risk reversal data compiled by Bloomberg, which shows the cost of options used to hedge against changes in the value of the currency.
The ruble strengthened for a third day, gaining 3.5 percent against the dollar, as Brent crude rose and Russia’s tax deadline approached. Companies are due to pay about 1.3 trillion rubles in taxes this month, according to a survey of five economists conducted by Bloomberg.
The dollar-denominated RTS Index of Russian stocks advanced 2.2 percent. Oil, the country’s biggest export, rebounded as the dollar slid. Brent crude for May settlement gained 4.5 percent to $55.91 a barrel.
All 10 industry groups in the developing-market stock index advanced, led by a 1.7 percent gain in energy companies. The gauge trades at 11.8 times projected 12-month earnings, compared with a multiple of 16.8 for the MSCI World Index of developed-market stocks.
The premium investors demand to hold emerging-market debt over U.S. Treasuries increased 10 basis points to 393 basis points, according to JPMorgan Chase & Co. indexes.