Bloomberg News

Emerging Stocks Advance on China Economic Growth; Gold at Record

July 13, 2011

July 13 (Bloomberg) -- Emerging-market stocks rose for the first time in four days after China’s economic growth beat forecasts sparking a rise in commodity prices. The euro rallied while gold climbed to a record.

The MSCI Emerging Markets Index surged 1.5 percent to 1,137.88 at 4:15 p.m. in New York, and Chinese shares rebounded from the biggest one-day slump in seven weeks. The Standard & Poor’s 500 Index pared gains advancing 0.3 percent as U.S. Federal Reserve Chairman Ben S. Bernanke said the central bank is prepared to take additional action if the economy appears to be in danger of stalling.

The euro strengthened 1.4 percent to $1.4167. Gold futures for August delivery climbed $23.20, or 1.5 percent, to settle at $1,585.50 on the Comex in New York.

The Chinese economy grew 9.5 percent in the second quarter, down from 9.7 percent in the previous three months, the statistics bureau in Beijing said today. The median estimate was 9.3 percent in a Bloomberg survey of 18 economists. Europe’s policy makers must come up with a “clear” response to stop the contagion that threatens the region’s single currency, incoming European Central Bank President Mario Draghi said in Rome.

China’s “data helps risk appetite in general,” said Goh Puay Yeong, a Singapore-based strategist at Credit Suisse Group AG. “It means that investors can price out the tail risk of a hard landing in China.”

The Shanghai Composite Index jumped 1.5 percent. The government said industrial output increased 15.1 percent in June, the most since May 2010. India’s Sensex rose 1 percent, and Brazil’s Bovespa gained 1.6 percent on the positive outlook for commodity demand in China, its largest trading partner.

Cyrela

Cyrela Brazil Realty SA Empreendimentos e Participacoes, Brazil’s second-biggest homebuilder by revenue, gained 6.2 percent after announcing it plans to buy back as much as 7 percent of its shares outstanding.

The Irish-German 10-year spread widened 60 basis points to a euro-era record of 1,123 basis points after Moody’s cut Ireland to Ba1 from Baa3, citing the probability that the country will need additional financing before it can return to the private market to borrow. Ireland is the third euro-region nation to be cut to below investment grade by a ratings company, joining Greece and Portugal.

Credit-default swaps insuring Irish bonds rose 62 basis points to 1,062, signaling a 61 percent chance of the government failing to pay in the next five years. Contracts on Greece increased eight basis points to 2,293, according to CMA.

Bernanke

Bernanke told Congress the central bank is prepared to buy more government bonds if the economy appears in danger of stalling. Bernanke said “disappointing” job growth in May and June was partly a result of temporary effects, such as high energy prices, and repeated that the economy will pick up in the second half of the year.

Bulgaria’s lev strengthened 1.3 percent against the dollar while Poland’s zloty gained 2 percent. Hungary’s forint advanced 1.9 percent.

Zinc rose 0.5 percent. China is the biggest buyer of zinc, used to rust-proof steel. Crude oil for August delivery advanced 0.6 percent to $98.05 a barrel on the New York Mercantile Exchange.

--With assistance from Claudia Carpenter, Mark Gilbert, Abigail Moses, Michael Patterson, Andrew Rummer and Dan Tilles in London. Editors: Richard Richtmyer, Glenn J. Kalinoski

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To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Leon Lazaroff in New York at llazaroff@bloomberg.net

To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net


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