Emerging-market stocks increased for the first time in four days as central banks in Brazil and South Korea cut rates to bolster growth and a unit of China’s sovereign wealth fund vowed to support banking shares.
The MSCI Emerging Markets Index (MXEF) rose 0.4 percent to 995.95. Brazil’s Bovespa index gained with oil company Petroleo Brasileiro SA (PETR4) fueling the advance. Turkey’s benchmark stock index jumped to the highest level since May 2011, while equity gauges in India, Hungary, Mexico and South Africa also surged. Industrial & Commercial Bank of China Ltd., the world’s largest lender by market value, climbed to a five-month high in Hong Kong.
South Korea cut interest rates hours after Brazil as economies around the world shield themselves from the risk of a deeper slowdown driven by weakness in China and austerity measures in Europe. First-time jobless claims in the U.S. dropped to the least since February 2008, adding to signs of improvement in the labor market.
“Investors tend to perceive the rate cut as a positive in the short term,” Michael Henderson, an economist at Capital Economics, said in a phone interview from London. “A lot of people were expecting a little more easing to happen and this move has been welcomed.”
The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF (EEM:US) tracking developing-nation shares, rose 0.9 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, dropped 4.9 percent.
ICBC, as China’s largest bank is known, advanced 4.3 percent. Central Huijin Investment Ltd., a unit of China’s sovereign wealth fund, started acquiring shares in the nation’s four largest banks including ICBC yesterday, the Beijing-based fund said in a statement on its website. The fund will continue “related market operations,” it said.
The Bovespa index (VXEEM) increased for the first time in three days, climbing 1.2 percent. Brazil’s central bank cut the benchmark lending rate to boost the recovery in the world’s second-largest emerging economy. The bank’s board reduced the target lending rate by a quarter-percentage point to a record low 7.25 percent yesterday.
Petrobras surged the most since Sept. 14, climbing 1.7 percent. Oil gained 1.3 percent on the New York Mercantile Exchange on concern tensions between Syria and Turkey will disrupt supplies.
Applications for jobless benefits dropped 30,000 to 339,000 in the week ended Oct. 6, Labor Department figures showed today. Economists forecast 370,000 claims, according to the median estimate in a Bloomberg survey. One state accounted for most of the plunge in claims, a Labor Department spokesman said as the data were issued to the press.
“The key data in the U.S. is the job market,” Sebastien Barbe, the head of emerging markets research and strategy at Credit Agricole CIB, said by phone from Paris today. “And the fact that it is improving means we could see reacceleration of exports.”
A gauge of financial stocks led the advance in the MSCI Emerging Markets Index with a 1.2 percent increase. The broader measure has climbed 8.7 percent this year, trailing an 11 percent increase in the MSCI World Index (MXWO) of developed countries. The emerging-markets gauge trades at 11.5 times estimated earnings, compared with the MSCI World’s multiple of 13.1, according to data compiled by Bloomberg.
Taiwan’s Taiex (TWSE) index dropped 1.8 percent, the most since July 23, leading declines among gauges in Asia. South Korea’s Kospi index sank 0.8 percent as the central bank cut the country’s growth forecast.
Turkey’s ISE National 100 Index rose 1.6 percent after a report showed the current-account deficit narrowed to a three- year low in August.
The S&P GSCI gauge of 24 raw materials climbed to the highest since Sept. 17 as copper and aluminum advanced.
Indian stocks climbed the most in a week after Finance Minister Palaniappan Chidambaram said there’s no serious threat of a credit rating downgrade and more policy measures would be implemented to revive growth.
Hyundai Motor Co. (005380), which sells more than 25 percent of its vehicles in South Korea and Europe, dropped 1.7 percent to a one-month low in Seoul. HTC Corp. (2498) slumped 6.9 percent in Taipei after Sanford C. Bernstein & Co. downgraded the stock.
The Bank of Korea lowered its forecast for the nation’s growth in 2012 to 2.4 percent from a July estimate of 3 percent as it cut the benchmark seven-day repurchase rate to 2.75 percent from 3 percent, a decision predicted by 13 of 16 economists.
The extra yield investors demand to own emerging-market bonds over U.S. Treasuries declined one basis point, or 0.01 percentage point, to 296, according to JPMorgan Chase & Co.’s EMBI Global Index.
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