Emerging Markets Rally as Jobs Data Miss Supports Rush to Riskby
Commodity-country shares, currencies gain as oil surges
U.S. rate hike in Sept. now ‘less likely’: Blackfriars’ Hann
Emerging-market stocks posted their biggest two-day gain in a month and currencies strengthened as disappointing U.S. jobs data reduced speculation the Federal Reserve will raise rates this month, enhancing the appeal of higher-yielding assets.
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong rose to an eight-month high and South Korea’s won led developing-nation currencies higher after figures released Friday showed fewer workers were added to U.S. non-farm payrolls in August than estimated in a Bloomberg survey. Brent crude’s 4.8 percent advance in the past two days supported assets of commodity-exporting nations such as Saudi Arabia, Russia and Malaysia. South African bonds increased the most in developing markets.
The odds of a Fed hike either this month or in November receded after the jobs figures, providing a reprieve for developing-nation stocks and currencies that had been falling since the Fed Chair Janet Yellen’s signal to investors on Aug. 26 that a positive result would embolden the U.S. central bank to raise borrowing costs in 2016. Once U.S. rates trend upward, the relative allure of emerging-market assets that pay higher returns gets diminished, thereby threatening to stoke outflows.
“Markets have taken the poor jobs data to mean that we are now less likely to see a U.S. rate rise this month,” said Tony Hann, the London-based head of equities at Blackfriars Asset Management, who favors stocks in India, Thailand and the Philippines. “The market is ‘addicted’ to liquidity and we get a Pavlovian-style response - a rate hike is bad and no
rate hike is good.”
U.S. non-farm payrolls climbed by 151,000 workers, less than the 180,000 projected by economists in a Bloomberg survey, following a gain in July that was revised up to 275,000. The odds of a Fed rate hike in September fell to 32 percent after the figures were released, down from 42 percent a week earlier. The chances of an increase in November or December are 34 percent and 61 percent, respectively.
U.S. and Canadian markets were closed Monday for holidays.
Brent crude soared as much as 5.5 percent on Monday in London as Saudi Arabia and Russia discussed actions to stabilize the global oil market. Oil later pared gains to trade up 1.7 percent at $47.63 a barrel.
The MSCI Emerging Markets Index rose 1.1 percent to 909.6 Monday in New York, following a 1 percent gain on Friday. The gauge has risen 15 percent this year and trades at 12.7 times the 12-month estimated earnings of its members. That compares with a 4.5 percent increase in the MSCI World Index, which is valued at a multiple of 16.4.
All 10 industry gauges jumped, led by information-technology shares, which rallied the most since Aug. 1. Tencent Holdings Ltd. provided the biggest boost to the measure, increasing 4.2 percent to a record in Hong Kong.
Brazil’s Ibovespa stock gauge fell from its highest in two years. Meat packer JBS SA plunged 10 percent after its chief executive officer was questioned by police as part of a fraud investigation in the country’s four largest pension funds. State-controlled oil producer Petroleo Brasileiro SA climbed 1.9 percent as crude prices rose.
The Tadawul All Share Index rose the most since April in Riyadh. Markets in Turkey and Hungary gained at least 0.8 percent. Warsaw’s WIG20 Index added the most in a almost a week, led by Orange Polska SA. The telecom advanced 7.3 percent in Warsaw, the most since July 16, after a report the company’s chief executive bought shares.
The Hang Seng China Enterprises Index climbed 1.5 percent, its third day of gains, and Taiwan’s Taiex gauge increased 1.1 percent. South Korea’s Kospi measure closed up 1.1 percent and Russia’s MICEX Index added 0.7 percent.
Thailand’s SET Index fell 1.9 percent, the biggest drop since April. The decline followed the latest update on the health of Thailand’s 88-year-old king, who has been a source of political stability throughout his reign. In addition to receiving treatment for hydrocephalus, the king is also undergoing constant renal replacement therapy, according to a statement from the royal palace late Sunday.
The MSCI Emerging Markets Currency Index strengthened 0.3 percent following a 0.3 percent gain on Friday.
The won appreciated 1.1 percent, while Taiwan’s dollar rose 0.6 percent. As oil surged, Indonesia’s rupiah advanced 0.7 percent and the ruble gained 0.1 percent. The rand jumped for a third day, adding 0.7 percent.
Thailand’s baht weakened 0.3 percent. Brazil’s real lost 0.8 percent, the most in emerging markets, on concern that newly installed President Michel Temer will face resistance to measures designed to boost growth and shore up the budget.
South African debt gained the most in emerging markets, with yields on bonds maturing in 2026 declining eight basis points to 8.87 percent.
Chinese sovereign bonds fell, pushing the 10-year yield up two basis points to 2.8 percent, while the similar-maturity Thai yield rose three basis points to 2.3 percent.
Indian financial markets are closed on Monday for a public holiday.