Oil Weighs on Emerging-Market Currencies as Crude Producers Fall

  • `Hard landing' for China seems `quite distant now,' FIM says
  • Brazilian stocks gain as lawmakers prepare impeachment debate

Currencies of emerging-market energy producers fell as crude dropped before a summit in Doha to discuss an output freeze. Brazilian stocks rallied after the nation’s top court cleared the way for an impeachment vote on Sunday.

Russia’s ruble and Mexico’s peso dropped as Brent crude prices slid 1.7 percent, reducing a second weekly advance. Gazprom PJSC in Russia and Colombia’s Ecopetrol SA were among oil and gas stocks that declined. South Korea’s won gained after Chinese data signaled the economy is stabilizing. The premium investors demand to own emerging-market debt increased.

“Oil has really come off today having risen quite sharply over the past week or so,” William Jackson, a senior emerging-markets economist at Capital Economics in London, who thinks Asian currencies will perform well as China stabilizes. “The market is realizing that it may have taken a step too far.”

Developing-market assets have rallied this year as commodity prices recovered and the Federal Reserve signaled it would go slow in raising interest rates. A meeting of oil producers on Sunday in Doha to discuss a freeze on output to help stem a global glut is a “short-term risk,” said Hertta Alava, head of emerging markets at FIM Asset Management Ltd. in Helsinki.

“Data from China has been relatively strong, showing that the economy is stabilizing.” said Alava, who favors stocks in Russia and the U.A.E. and has been adding to her Hong Kong exposure. “A hard landing scenario seems quite distant now. Commodities have recovered from very low levels, which together with more benign interest rate outlook in U.S. has strengthened emerging-market currencies.”

Currencies

The MSCI Emerging Markets Currency Index was little changed on Friday and climbed 0.6 percent this week. The ruble fell 0.4 percent and the peso dropped 0.7 percent. Brent crude declined to $43.10 a barrel in London

Nations representing about half the world’s oil production will gather Sunday to discuss freezing their output at January levels. Russia, Saudi Arabia, Qatar and Venezuela already made a preliminary deal in February and are seeking to add more producers.

Turkey’s lira declined for a fourth day, dropping 0.2 percent. It’s the worst-performing currency against the dollar in emerging markets this month after the Mexican peso and Poland’s zloty.

South Korea’s won strengthened 0.9 percent on Friday. China’s new credit, industrial output, fixed-asset investment and retail sales all picked up last month to beat analysts’ forecasts. For the first quarter, the economy grew 6.7 percent, in line with analyst estimates and the slowest pace in seven years.

Stocks

The MSCI Emerging Markets Index index rose 0.2 percent as nine of 10 industry groups advanced. Energy stocks on the gauge fell 0.9 percent. The developing-nation equity benchmark rose 3.6 percent this week, the most since the five days ending March 4.

Brazil’s Ibovespa Index climbed 1.6 percent, extending a weekly advance to 5.58 percent, the most since the week ending March 4. The Supreme Court overturned a government motion and allowed an impeachment vote against President Dilma Rousseff to continue as scheduled on Sunday.

The Hang Seng China Enterprises Index retreated 0.3 percent on Friday, paring a weekly advance to 5.9 percent. The Shanghai Composite Index retreated 0.1 percent on Friday and 3.1 percent for the week.

Bonds

The extra yield investors demand to own emerging-market debt over U.S. Treasuries widened three basis points to 395, according to JPMorgan Chase & Co. indexes.

Turkish bonds climbed for a fifth day, with the yield on 10-year bonds dropping 10 basis points to 9.22 percent. Yields on South African bonds maturing in 2026 climbed four basis points to 9.01 percent.

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