Emerging-Market Stocks Gain as OPEC Adds to Risk-Rally Momentum

  • Energy shares rally most in three months on earnings prospects
  • Indian bonds drop after attacks on terrorist camps in Pakistan

Emerging-market equities rose for a third day as OPEC’s preliminary agreement to cut production further stoked demand for higher-risk assets that have rallied this month as global central banks pledged to sustain monetary stimulus.

China’s Cnooc Ltd. and Sasol Ltd. of South Africa led a gauge of developing-nation energy stocks to the biggest gain in three months after the Organization of Petroleum Exporting Countries on Wednesday agreed to reign in output for the first time in eight years. Shares in the Arab Gulf posted their steepest advance since March. Turkey’s lira retreated on bets higher oil prices will hurt the economy of the net energy importer. Indian stocks and the rupee sank after the nation attacked terrorist camps in Pakistan.

Stocks gained as OPEC’s move to reduce production boosted the earnings outlook for developing-nation commodity producers and Goldman Sachs Group Inc. said the deal could add as much as $10 a barrel to oil prices. The MSCI Emerging Markets Index rose 0.1 percent to 913.39. The benchmark gauge has advanced 2.2 percent this month and is headed for its best quarterly performance since March 2012.

“This should help put a floor on oil prices, which is good for overall risk sentiment,” said Christopher Shiells, a senior emerging-markets analyst at Informa Global Markets Ltd., who recommends buying the ruble and selling the Mexican peso. “There is still a window for the emerging-market rally to continue.”

OPEC Deal

OPEC agreed to reduce production to a range of 32.5 million to 33 million barrels a day, Iran’s Oil Minister Bijan Namdar Zanganeh said after the meeting in Algiers. An OPEC committee will recommend limits at the formal gathering in November and Iran will be exempt from capping output. Brent crude Jumped 1.1 percent to $49.24 a barrel after rallying 5.9 percent on Wednesday.

Cnooc and Sasol each climbed more than 5.1 percent. Lukoil PJSC advanced 2.4 percent in Moscow. The Micex Index added 0.8 percent. Oil is Russia’s biggest export. The FTSE/JSE Johannesburg All Share Index jumped 1.8 percent as gains in commodities spread to industrial metals, lifting shares of producers including BHP Billiton Ltd. and Anglo American Plc.

The Bloomberg GCC 200 Index of Gulf stocks climbed 1.2 percent, led by a 1.6 percent rally in Saudi Arabian shares.

Indian Markets

The S&P BSE Sensex dropped 1.6 percent, the most in three months. The rupee declined 0.6 percent and Indian sovereign bonds maturing in 2026 retreated, sending the yield up eight basis points, the most since August 2015, to 6.86 percent.

India said it attacked terrorist camps in Pakistan late on Wednesday as the country retaliated for a deadly strike against Indian soldiers earlier this month. Heavy casualties were inflicted in surgical strikes, the nation’s Director General of Military Operations Ranbir Singh said at a news conference. Pakistan’s army rebuffed India’s announcement, calling the claim of surgical strikes an “illusion.”

“This is negative for the economy,” said Ashtosh Raina, Mumbai-based head of foreign-exchange trading at HDFC Bank Ltd. “Any strike, any tension across the border is definitely going to hurt sentiment.”

Currencies, Bonds

The MSCI Emerging Markets Currency Index ended the session little changed. The measure has gained 2.2 percent since the end of June, set for a third consecutive quarterly advance. The Colombian peso strengthened 0.6 percent. Brazil’s real slipped 1.4 percent.

The premium investors demand to hold emerging-market bonds over U.S. Treasuries widened one basis point to 339, according to JPMorgan Chase & Co. indexes.

Yields on five-year Russian government bonds fell six basis points to 8.4 percent, the lowest in a week. The ruble slipped 0.1 percent, after rallying 1.3 percent on Wednesday, as banks including Danske Bank A/S and Societe Generale SA said doubts remained about how cuts will be ironed out at OPEC’s meeting in November.

Turkey’s lira fell 0.7 percent to the lowest closing level against the dollar since early August. The nation’s 10-year sovereign bonds retreated, sending yields up seven basis points to 9.65 percent.

South Africa’s rand slid for a second day, weakening 2 percent, amid speculation inflows arising from Anheuser-Busch InBev SA’s purchase of SABMiller Plc may have run their course.

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