Emerging-market stocks rose Monday, with the benchmark index posting the biggest four-day gain in 16 months, after German and French leaders pledged to shield European banks.
The MSCI Emerging Markets Index increased 1.6 percent to 898.27 at the close of trading, taking its gains in the past four days to 8.1 percent, the biggest four-day advance since May 31, 2010. Brazil’s Bovespa Index surged 4 percent as commodity prices rose. Mexico’s benchmark rose 1.6 percent. Hungary’s BUX Index jumped 3.2 percent to a one-month high, and the WIG20 Index climbed 3.4 percent after Prime Minister Donald Tusk won Polish general election. India’s Sensex Index climbed 2 percent and South Africa’s benchmark gauge rose 2.1 percent.
German Chancellor Angela Merkel and French President Nicolas Sarkozy will deliver a plan to recapitalize European banks and address the Greek debt crisis by Nov. 3. Belgium will pay 4 billion euros ($5.4 billion) for the local unit of the failing Dexia SA, Belgian Finance Minister Didier Reynders said Monday. U.S. employers added more workers than expected in September, according to payrolls data on Oct. 7.
“Friday’s better-than-expected U.S. payroll report and the Franco-German agreement to find a solution to the euro-zone debt crisis economic data will add more confidence to markets as the new weeks starts,” Chris Weafer, chief strategist at Troika Dialog in Moscow, said in an e-mailed report Monday. “That offers the prospect of a more favorable market backdrop through October and may encourage those hoping for a year-end rally to add market exposure earlier.”
Merkel said European leaders will do “everything necessary” to ensure that banks have enough capital. The Belgian government will also guarantee 60 percent of a so-called bad bank to be set up for Dexia’s troubled assets, Reynders said in Brussels at a press conference. U.S. payrolls rose by 103,000, the Labor Department said Oct. 7. That was more than the 60,000 median forecast of economists surveyed by Bloomberg News.
The Polish zloty led gains among emerging-market currencies against the dollar, rising 3.6 percent. The Hungarian forint appreciated 3.4 percent and the ruble rose 2.5 percent. Mexico’s peso advanced 1.7 percent. Brazil’s real strengthened 0.5 percent.
The yuan appreciated 0.6 percent to 6.3486 per dollar in Shanghai on speculation policy makers will tolerate gains after the U.S. said the Asian nation undervalues its currency. It was the strongest closing level since the end of 1993, and the biggest daily increase since China loosened the yuan’s peg to the dollar on July 21, 2005, according to the China Foreign Exchange Trade System.
China’s financial markets were closed for National Day holidays last week.
The Bovespa index rose the most in two months as prospects for a solution to Europe’s debt crisis improved the outlook for Brazil’s largest companies.
Vale SA, the world’s largest iron-ore producer, advanced 3.2 percent after metals reversed losses. Oil companies OGX Petroleo & Gas Participacoes SA jumped 4.7 percent and Petroleo Brasileiro SA increased 3.3 percent, following crude higher.
Grupo Financiero Banorte SAB, a Mexican lender, surged 5.1 percent, the most among stocks in the nation’s benchmark gauge.
The PX Index sank 1.8 percent in Prague. Erste Group Bank AG, Eastern Europe’s second-biggest lender, said in a statement that it will post a full-year loss of as much as 800 million euros after writedowns on its Hungarian and Romanian units. The bank won’t pay a dividend this year and shelved a plan to repay 1.2 billion euros of aid from the Austria government early.
The EGX30 Index slid 2.3 percent in Egypt after Coptic Christian protesters clashed with security forces in Cairo yesterday, in a night that left at least 24 people dead and more than 200 injured, according to news reports.
The Shanghai Composite Index lost 0.6 percent after a week of holidays in which house sales slid and China cut fuel prices. The Kospi Index gained 0.4 percent in Seoul. Taiwan was closed for a holiday.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell three basis points, or 0.03 percentage point, to 447, according to JPMorgan Chase & Co.’s EMBI Global Index.
Emerging-market stocks are “cheap” and Pacific Investment Management Co. is buying in China after the nation’s shares tumbled this year, said Maria Gordon, an emerging-market equity fund manager at Pimco.
“We are definitely fishing in the more cyclically distressed areas of the market where valuations are very, very cheap,” London-based Gordon said in an interview with Sara Eisen on Bloomberg Television Monday. “We’re selectively accumulating positions” in China, Gordon said.
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