Emerging-Market Stocks Rise on China as Mexico’s Peso Tumbles

  • Equities in developing nations climb to two-month high
  • Mexican peso, Turkish lira lead losses among major currencies

Lira Replaces Rand as World's Most Volatile Currency

Emerging-market stocks climbed to a two-month high after data showing rising producer prices in China bolstered confidence in the global economy. Mexico’s peso and Turkey’s lira sank to all-time lows.

Investors pushed up the value of developing-nation assets after data showed China’s producer price index rose at the fastest pace in more than five years in December, boosting optimism about the outlook for the world’s second-largest economy. Still, that wasn’t enough to prevent the worst-performing currencies this year from extending losses as traders tested the resolve of both Turkey and Mexico’s central banks to defend them.

Stocks

  • The MSCI Emerging Markets Index added 0.8 percent
  • Argentina’s Merval index climbed for a 10th straight day to the highest level on record; trading volume more than doubled the average of the past 30 days.
  • The Ibovespa posted a back-to-back advance, led by miner Vale SA.
  • Russia’s RTS index gained the most among the world’s biggest equity markets.

Currencies

  • The MSCI Emerging Markets Currency Index halted a two-day slide, rising 0.3 percent.
  • South Korea’s won led gains among the world’s major currencies, climbing 1.1 percent and rebounding from Monday’s slump.
  • Turkey’s lira fell the most among peers, dropping 2.1 percent, even after the nation’s central bank pledged to tackle the heightened volatility in prices.
  • Mexico’s peso set a new record low as Banxico’s dollar sales last week failed to spur a consistent rebound.

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Analysis

  • MEXICO: The pace of Banxico’s dollar sales “is neither sustainable nor likely to work,” said Christian Lawrence, a rates and currency strategist at Rabobank NA in New York. “It is very hard for a country to strengthen a currency.”
  • TURKEY: “We have always maintained that providing FX liquidity to the banking system is not really necessary -- nor is it a sufficient part of a solution to stop lira depreciation,” Commerzbank AG analyst Tatha Ghose said by e-mail.
  • CHINA: "Factory reflation is a positive for China’s economy – real borrowing costs are now negative," Bloomberg Intelligence Chief Asia Economist Tom Orlik wrote in a note.

— With assistance by Constantine Courcoulas, Ahmed A Namatalla, Srinivasan Sivabalan, Onur Ant, Isabella Cota, and Ben Bartenstein

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