Emerging Stocks End Seven-Day Gain as Traders Weigh Doha Impasse

  • Brazilian stocks retreat as impeachment process advances
  • Indian shares rally as oil importers offset broader decline

Emerging-market stocks halted a seven-day rally after the world’s biggest crude producers failed to agree on an output freeze. Equities in some energy-importing countries advanced, limiting the decline on the benchmark gauge.

Russian equities fell for a third day, led by energy companies. Chinese stocks slumped the most in three weeks. Indian shares rose to the highest level since January. Brazilian stocks retreated as traders reevaluated the potential impact of removing President Dilma Rousseff from office. Brent crude declined 0.4 percent to $42.92 a barrel in London after falling to as low as $40.10.

Developing-nation assets declined after talks in Doha ended without an agreement mainly because some countries including Saudi Arabia refused to curb production without similar commitment from other major producers such as Iran. The drop was offset to some extent by bets that growth prospects and capital inflows across developing nations will counter the impact of an oil glut.

“The resilience of China’s growth, the weakness in the U.S. dollar and maybe also the impeachment of Dilma Rousseff in Brazil, as well as the recent strong recovery in both prices and flows into emerging markets, are creating enough momentum to convince investors that any price decline is a buying opportunity,” said Luca Paolini, the chief strategist at Pictet Asset Management in London.

The MSCI Emerging Markets Index slipped 0.4 percent to 843.68. Energy stocks in gauge fell 1.1 percent as eight of 10 industry groups declined. A gauge of developing-nation currencies was little changed.

Investment flows into U.S. exchange-traded funds that buy emerging-market stocks and bonds almost doubled, extending the longest winning streak since last May to nine weeks. Deposits into emerging-market ETFs that invest across developing nations as well as those that target specific countries rose to $706.5 million in the week ended April 15 from $373.2 million in the previous period, according to data compiled by Bloomberg.

The Micex Index retreated 0.8 percent in Moscow. The dollar-denominated RTS Index of Russian equities fell 0.6 percent as Gazprom PJSC, Lukoil PJSC and Rosneft OJSC each fell at least 1.1 percent. The failure of the Doha negotiations steps up pressure on the government as it wrestles with a second year of recession and international sanctions tied to its role in the Ukraine conflict.

India, Brazil

In Mumbai, the S&P BSE Sensex added 0.7 percent, gaining for a fourth day. Software exporter Infosys Ltd. jumped the most on the gauge after predicting better-than-expected sales growth. The Shanghai Composite Index retreated 1.4 percent.

The Ibovespa fell 0.6 percent in Sao Paulo. Rousseff’s presidency hung by a thread after lawmakers in the lower house approved her impeachment. While Brazilian assets have rallied in the past month on bets her removal will usher in a more business-friendly government, some investors see future gains being limited as tackling the country’s economic and fiscal crises will be difficult no matter who is in power.

The MSCI developing-nation benchmark gauge trades at 11.9 times the projected earnings of its members in the next 12 months, a 26 percent discount to the valuation for advanced-nation shares.

Brazil’s real declined 2 percent, the most among emerging-market currencies, as the central bank sold reverse swaps to weaken it. The Malaysian ringgit fell 0.6 percent, while South Korea’s won slid 0.4 percent.

Russia’s ruble strengthened 0.5 percent to 66.109 per dollar after 66.80. Societe Generale SA and Rabobank both predicted the ruble will weaken beyond 70 against the dollar.

The premium investors demand to own emerging-market debt over U.S. Treasuries narrowed two basis points to 393, according to JPMorgan Chase & Co. indexes.

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