Bloomberg News

Emerging-Market Stocks Rise on Speculation Europe Will Aid Banks

October 05, 2011

Oct. 5 (Bloomberg) -- Emerging-market stocks rose, pushing the benchmark index up for the first time in four days, as a report that European leaders are seeking ways to recapitalize banks and U.S. companies added more jobs than expected eased concern about an economic slowdown.

The MSCI Emerging Markets Index increased 0.6 percent to 836.54 as of 5:44 p.m. New York time. The BUX Index surged 5.7 percent in Budapest, led by Gedeon Richter Nyrt., Hungary’s biggest drugmaker. Chile’s Ipsa index climbed 2.6 percent while Brazil’s benchmark climbed 0.7 percent. The Kospi Index slid 2.3 percent in South Korea and India’s Sensex Index fell 0.5 percent.

The International Monetary Fund said today European Union officials are working on plans to boost bank capital after a Financial Times report that EU finance ministers are discussing ways of coordinating recapitalizations of the region’s banks sparked a late surge in U.S. stocks yesterday.

“The last-hour rally in the U.S. that is being attributed to talks of European authorities finding a solution to sovereign debt issues gave hope to investors that a consolidated effort will arrive within days,” Slava Smolyaninov, an analyst at UralSib Corp. in Moscow, wrote in an e-mailed report.

The Standard & Poor’s 500 Index rose 1.8 percent, extending gains in the past two days to 4 percent. The gauge reversed a loss in the final 50 minutes of trading yesterday after the Financial Times quoted Olli Rehn, EU commissioner for economic affairs, as saying there’s an “increasingly shared view” the region needs a coordinated approach to halt the debt crisis.

U.S. Data

Companies in the U.S. added 91,000 jobs last month, according to data from ADP Employer Services. That’s more than the 75,000 median forecast of economists surveyed by Bloomberg News. U.S. service industries expanded in September at a slower pace than a month earlier. The Institute for Supply Management’s non-manufacturing index fell to 53 from 53.3 in August. The median forecast of 75 economists surveyed by Bloomberg News was for a drop to 52.8.

Moody’s cut Italy’s rating three levels to A2 from Aa2, with a negative outlook, and said other European countries rated below the top Aaa level may face reductions in their rankings.

Emerging-market currencies rallied against the dollar. The Turkish lira jumped 1.1 percent from a record low after policy makers in Turkey and Russia stepped up sales of foreign-currency reserves to counter a sell-off in developing-nation assets. The ruble rebounded 0.5 percent after weakening 3 percent in the last five days.

Currencies Rally

The Brazilian real and Mexican peso each appreciated 1.4 percent, while South Africa’s rand jumped 1.5 percent, the most among 25 emerging currencies tracked by Bloomberg.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries declined 15 basis points, or 0.15 percentage point, to 475, according to JPMorgan Chase & Co.’s EMBI Global Index.

Gedeon Richter soared 9.4 percent in Budapest, the most in almost three years, after a clinical trial of cariprazine, an antipsychotic agent, showed “significant” symptom improvement for patients, according to a statement by Richter and its partner Forest Laboratories Inc. on the website of the Budapest Stock Exchange today.

Brazil’s Bovespa index gained 0.6 percent in its first increase in four days. Tam SA led advances for companies that depend on domestic demand as traders wagered on deeper interest- rate cuts. The Ipsa rose 2.6 percent in Santiago, the first advance in six days.

The ISE National 100 Index rose 0.2 percent in Istanbul, led by banks, after the central bank earlier today cut reserve requirements on foreign-currency deposits by as much as 250 basis points.

South Africa, Russia

The FTSE/JSE Africa All Shares Index gained 1 percent in Johannesburg. The Micex Index fell 0.2 percent in Moscow. China’s stock market is closed for a holiday.

In Mumbai, State Bank of India fell 3.8 percent, taking losses in the past six days to 14 percent. The stock tumbled 4 percent yesterday after Moody’s cut its rating on the lender’s financial strength, citing deteriorating asset quality.

GS Engineering & Construction Corp. sank 15 percent in Seoul and rival Daelim Industrial Co. tumbled 14 percent. Both builders were hit by speculation lower oil prices will damp plant construction demand in the Middle East, said Im Jeong Jae, a fund manager at Shinhan BNP Paribas Asset Management Co.

--With assistance from Belinda Cao and Tal Barak Harif in New York, Eduardo Thomson in Santiago, Berni Moestafa in Jakarta and Shikhar Balwani in Mumbai. Editors: Linda Shen, Ana Monteiro, Richard Richtmyer

To contact the reporter on this story: Jason Webb in London at jwebb25@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


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