Emerging Stocks, Currencies Head for Weekly Gain on Fed Outlook

Emerging-market stocks and currencies headed for a weekly gain as lackluster U.S. economic data fueled speculation that the Federal Reserve will move slowly in raising interest rates, bolstering demand for riskier assets.

The MSCI Emerging Markets Index rose 0.8 percent this week to 1,042.79 as of 11:15 a.m. in New York. It jumped 0.7 percent Friday. A Bloomberg gauge tracking 20 developing-nation currencies gained 1 percent in the past five days to the highest level since mid-January. Chinese shares traded in Hong Kong jumped on speculation the start date of an exchange link with Shenzhen will be announced soon.

The Federal Reserve says it will raise its benchmark rate, which has been near zero since December 2008, when the labor market improves and inflation shows signs of increasing to its 2 percent goal. U.S. hiring for April missed estimates and economic growth slipped to 0.2 percent in the first quarter. Most economists in a Bloomberg survey before the data predicted the central bank will start tightening in September.

“Consensus is moving in the direction” of expecting a delay in rate increases, Simon Quijano-Evans, the head of emerging-market research at Commerzbank AG in London, said by e-mail. “But that can turn at any time on a single good U.S. data release. The latest turnaround in Treasury yields is clearly supportive of emerging-market assets.”

Extending Gains

The emerging-market gauge has climbed 9.1 percent this year as countries from India to Turkey cut interest rates, a cease-fire was reached between pro-Russian rebels and government troops in Ukraine, and China took measures to support economic growth. The measure trades at 12.5 times the projected earnings of its members, compared with 16.8 times for the MSCI World Index of advanced-nation shares.

All 10 industry subgroups on the developing-nation index rose Friday. China Mobile Ltd. and China Telecom Corp. surged at least 3.6 percent as the Hang Seng China Enterprises Index halted a three-day loss, rising the most since May 8.

“There are some market talks that the Hong Kong Stock Exchange will announce details on the Shenzhen connect this weekend, with the starting date being in September,” said Yen Chiu, a Hong Kong-based trader at Shenwan Hongyuan Group.

The Shenzhen program is an exchange link that will expand foreign investors’ access to smaller mainland companies.

The Micex Index jumped 0.6 percent in Moscow, while the dollar-denominated RTS Index added 1.5 percent. VTB Group led the gains. Russia’s economy shrank 1.9 percent in the first quarter from a year earlier, compared with a median forecast for a 2.6 percent contraction among analysts surveyed by Bloomberg.

Brazilian lenders led a 0.4 percent gain in the Ibovespa. Itau Unibanco Holding SA contributed the most the stock benchmark’s advance, increasing 0.8 percent.

Currencies Gain

The ringgit strengthened 0.5 percent against the dollar, rising for a third day as data showed Malaysia’s economy grew 5.6 percent in the first quarter from a year earlier, more than the 5.5 percent median estimate in a Bloomberg survey.

The zloty climbed 0.4 percent against the euro after data showed Poland’s first-quarter economic growth was driven by consumer spending and recovering demand from the euro area.

The premium investors demand to own emerging-market debt over U.S. Treasuries increased two basis points to 334 basis points, according to JPMorgan Chase & Co. indexes.

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