About $2.46 trillion was added to the value of global stocks in the first four days of this week as emerging-market equities rebounded. An MSCI gauge of developing-economy stocks is set for its best week in almost four years as the Hang Seng China Enterprises Index heads toward a gain of more than 8 percent across five days. The ringgit and Indonesia’s rupiah both gained more than 6 percent since last Friday, sending the Bloomberg JP Morgan Asia Dollar Index toward a two-month high. Zinc surged as Glencore Plc said it would cut production.
Global stocks have surged this week, with energy shares driving gains
“This looks like a sustainable turnaround,” Michael McCarthy, chief market strategist in Sydney at CMC Markets, said by phone. “Investors have become less pessimistic. Things are definitely not in a strong economic environment but there is an expectation of further central bank support.”
Global stocks are staging a comeback in the wake of their worst quarter since 2011 as signs of an uneven recovery in the U.S. job market and data indicating slowing growth from China and Japan to Germany and the U.K. spur stimulus bets. With futures trading putting the odds the Fed will raise rates this year below 40 percent, Nobel prize-winning economist Joseph Stiglitz said he hopes rates don’t rise because America’s “anemic” recovery needs continued support. Oil’s rebound has also underpinned equity gains, amid speculation demand is picking up and as tensions in the Middle East increased.
Stocks
The MSCI Asia Pacific Index rose 1.5 percent by 12:23 p.m. in Tokyo, erasing a 0.4 percent drop on Thursday to be headed for a 5.4 percent gain this week. That’s the biggest jump since December 2011.
The MSCI Emerging Markets Index climbed 1.3 percent Friday, led by a 2.8 percent rally in the gauge of Chinese shares in Hong Kong. The developing-economy equity measure touched its lowest level in six years in August as Chinese equities plunged.
The Shanghai Composite Index climbed 0.6 percent Friday. The benchmark gauge for mainland China’s biggest trading venue climbed 3 percent on Thursday, an underwhelming gain for its first day of trading after a week-long holiday during which its Hong Kong peer surged 11 percent.
The Shanghai Composite's first day of trading after the week-long holiday underwhelmed compared to gains in Hong Kong
Minutes from the Fed’s September meeting kept expectations for higher rates pushed into next year, weakening the dollar and boosting energy, raw-material and industrial companies amid speculation that a weaker U.S. currency will lift their profits. The Fed noted that domestic economic conditions had continued to improve, though concerns over China and its potential spillover to other economies “were likely to depress U.S. net exports.”
Japan’s Topix index jumped 1.4 percent, bringing its advance in the week to 3.9 percent, the first such increase since mid-September. In Australia, the S&P/ASX 200 Index gained 1 percent, set for a weekly climb of 4.2 percent, the most since February. New Zealand’s S&P/NZX 50 Index climbed 0.5 percent.
Markets in Taiwan and South Korea are closed for holidays Friday, with the Philippines due to report on exports. Thailand also updates on its foreign reserves. Japan is shut Monday for a holiday.
Currencies
Emerging-market currencies headed for their biggest weekly gain in more than six years. A Bloomberg index tracking 20 developing-nation currencies climbed 3.1 percent this week, recovering from its biggest quarterly loss since 2011. Indonesia’s rupiah, Russia’s ruble and Malaysia’s ringgit were the world’s best performers with gains of more than 6 percent versus the dollar.
The ringgit strengthened 2.3 percent to 4.1405 per dollar, set for a weekly surge of 6.2 percent, the most since 1998. Malaysia is the Asian region’s only major oil exporter and the currency tends to move in line with crude prices.
“The strong rise in the ringgit is on the back of the rally we’ve seen in oil prices,” said Khoon Goh, a senior strategist at Australia & New Zealand Group Ltd. in Singapore. “The U.S. dollar was weaker on the back of the Fed minutes, which were read as dovish by the market, and this also helped the move in the ringgit.”
The rupiah gained 3.2 percent, with the currency headed for an 8.9 percent surge in the week, the best performance among its Asian peers. Both the rupiah and ringgit reached their weakest levels since the 1998 Asian financial crisis during the third quarter.
All 23 emerging-market currencies tracked by Bloomberg are projected to weaken versus the greenback by the first quarter, and Credit Suisse Group AG to Pacific Investment Management Co. say the current rally will prove fleeting. Pimco, which oversees $1.52 trillion of assets, said Thursday it expects emerging-market currencies to come under renewed pressure and favors investments that will profit from their depreciation.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was little changed Friday after a 0.4 percent decline on Thursday. The gauge is heading for a weekly loss of 1.1 percent, its worst five days since mid-June.
Odds of the Fed boosting rates from near zero at their meeting this month are at 10 percent, according to Fed funds futures, while the chance of a move in December is holding below 40 percent, down from 59.9 percent a month ago. That stands in contrast to comments from Fed officials including Chair Janet Yellen, who have touted the possibility of a rate rise before the year is out since the Sept. 17 decision.
Commodities
Zinc for three-month delivery on the London Metal Exchange jumped 5.9 percent, heading for the biggest daily advance since 2010. Glencore plans to cut production of the metal by about a third, having already curbed copper and coal output, as the Swiss mining and trading giant continues to navigate a rout in commodity prices that last week briefly wiped $6 billion from its market value.
The Bloomberg Commodity Index advanced 0.4 percent Friday, set to erase September’s retreat. Gold for immediate delivery advanced 0.5 percent to $1,144.34 an ounce.
Oil is the standout performer among commodities this week, with WTI headed for its steepest weekly advance since August. Brent crude gained 0.5 percent Friday to $53.30 a barrel, leaving it up 11 percent in the week, the most since March 2009.
A “new capital discipline” in the industry will allow consumption to catch up with supply, boosting prices, Gary Ross, the founder and chairman of PIRA Energy Group, said Thursday. World oil use will expand more than forecast this year, according to OPEC Secretary-General Abdalla Salem El-Badri. The rebound in oil bolstered energy stocks, with the industry group leading gains in Asia and the world this week as the dollar faltered.
WTI spiked above $50 last session amid reports that Russian cruise missiles meant for Syria had landed in Iran.
Bonds
Treasuries advanced amid losses in the week, with yields on notes due in a decade declining two basis points, or 0.02 percentage point, to 2.09 percent following two rising days.
Similar maturity Australian government bonds yielded 2.67 percent, up five basis points to bring their weekly advance to five basis points. Ten-year Japanese debt rates were little changed at 0.33 percent, while those on New Zealand notes rose a fourth day, adding three basis points to 3.45 percent. (Bloomberg)
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