Emerging-Market Stocks Cap Longest Gain Since July on Fed Signal

Mar 31, 2014 5:40 pm ET

March 31 (Bloomberg) -- Emerging-market stocks advanced for a seventh day, the longest rally since July, after the Federal Reserve signaled continued economic support and as concern eased that tension between Russia and Ukraine would escalate.

The MSCI Emerging Markets Index advanced 1 percent to 994.65, trimming the biggest quarterly decline since the April- to-June period. Russia’s Micex Index jumped to a one-month high as the nation’s foreign minister met with his U.S. counterpart. Turkey’s lira led gains among world major currencies on speculation Prime Minister Recep Tayyip Erdogan’s party victory in local elections may arrest foreign capital outflows. Brazil’s Ibovespa rose to an 11-week high.

Federal Reserve Chair Janet Yellen said “considerable slack” in the labor market is evidence that the unprecedented accommodation will still be needed for “some time” to put Americans back to work. The MSCI Emerging Markets Index has lost as much as 16 percent since May 22, when the Fed signaled stimulus could be trimmed if the economy showed improvement.

“The punchbowl is not being taken away,” Hank Smith, who oversees $7 billion as chief investment officer at Radnor, Pennsylvania-based Haverford Trust Co., said by phone. “The markets are expressing relief that the Fed will remain that backstop of support for the foreseeable future. That’s supportive of emerging markets.”

The iShares MSCI Emerging Markets Index exchange-traded fund advanced 0.7 percent to $41.01, rising for an eighth day. The premium investors demand to own emerging-market debt over U.S. Treasuries slipped 0.02 percentage point to 298 basis points, according to JPMorgan Chase & Co.

Next Steps

Russia’s Micex Index rallied 1.9 percent, led by OAO Lukoil. During four hours of meetings yesterday in Paris with Russian Foreign Minister Sergei Lavrov, U.S. Secretary of State John Kerry said “ideas and suggestions” were discussed and he would consult with President Barack Obama on next steps.

The Borsa Istanbul 100 Index rose to the highest level since December and the Turkish lira jumped 2.3 percent. The victory consolidates the Justice and Development Party’s hold on power after a more than 13-year tenure that is the longest period of political stability since the multiparty system was adopted in 1946.

The Ibovespa advanced as meatpacker Marfrig Global Foods SA led Brazilian exporters higher amid eased concern that the global economic recovery will falter. Cia. de Saneamento Basico do Estado de Sao Paulo, the water utility known as Sabesp, rose after posting fourth-quarter earnings that beat estimates.

Indian stocks climbed to a record, led by metal companies and automobile producers. The Shanghai Composite Index capped the biggest quarterly loss since June as industrial and consumer-discretionary companies slumped before the release of manufacturing data tomorrow. Egypt’s EGX 30 Index slumped 3.6 percent, the most among 94 world gauges.