Oct. 7 (Bloomberg) -- Emerging-market stocks rose to a 13- month high and currencies of commodity producers strengthened as the global economic recovery prompted investors to seek higher- yielding assets. Gold climbed to a record and oil rallied.
The MSCI Emerging Markets Index added 0.5 percent at 10:03 a.m. in London. Futures on the Standard & Poor’s 500 Index climbed 0.5 percent. Gold reached $1,048 an ounce, its second record in a row. The Canadian dollar rose to the highest level in a year against the U.S. currency and New Zealand’s dollar traded at a 14-month high.
Federal Reserve Bank of Kansas City President Thomas Hoenig said yesterday the U.S. economic rebound should support higher interest rates “sooner rather than later,” after Australia became the first Group of 20 nation to increase borrowing costs since the start of the global financial crisis. Two financial companies went public, raising almost $10 billion in stock offerings, and Citigroup Inc. upgraded Latin American equities to “overweight” from “underweight.”
“Earnings momentum is improving and the earnings recovery in 2010 looks strong,” Citigroup wrote in the note dated Oct. 6. “Valuations have also improved relative to other regions.”
Verisk Analytics Inc., the supplier of actuarial data co- owned by insurers including Travelers Cos. and CNA Financial Corp., raised $1.88 billion in the biggest U.S. IPO since Visa Inc. in 2008. Banco Santander SA’s Brazilian unit is selling about 14.1 billion reais ($8 billion) of shares.
Philippines, Pakistan
The Philippine Stock Exchange Index jumped 2.9 percent to the highest level since April 2008, Pakistan’s Karachi 100 Index gained 2.4 percent and Russia’s Micex Index climbed 1.3 percent.
The extra yield investors demand to own developing nations’ bonds instead of U.S. Treasuries fell three basis points to 3.1 percentage points, the narrowest gap since September 2008, according to JPMorgan Chase & Co.’s EMBI+ Index. Indonesian spreads fell eight basis points and South Africa’s narrowed by 10 basis points.
The advance in U.S. futures indicated the S&P 500 may climb for a third straight day, while Europe’s Dow Jones Stoxx 600 Index rose 0.3 percent and the Morgan Stanley Asia Pacific Index advanced 1.8 percent.
Alcoa Inc., the biggest U.S. aluminum producer, is scheduled to release results after the market closes, the first company in the Dow Jones Industrial Average to report third- quarter earnings. The shares added 1 percent in German trading.
Alcoa Estimates
Credit Suisse Group AG’s Sveinn Palsson wrote in a note yesterday that investors should trade Alcoa options to bet that the company’s shares will rally after its results. Alcoa may post a loss of 9 cents a share compared with a profit of 37 cents a year earlier, according to analysts’ estimates compiled by Bloomberg.
Analysts’ forecasts show U.S. companies will report a ninth straight quarter of declining profits, the longest streak since the Great Depression, before returning to growth in the final three months of the year.
Alcoa’s report comes as signs increase that the global economic recovery is gaining enough momentum for central banks to increase borrowing costs. Hoenig’s comments yesterday in a speech in Denver paralleled those by Fed Governor Kevin Warsh, who said Sept. 25 the central bank may need to tighten “with greater force than is customary,” and Richmond Fed President Jeffrey Lacker, who said Oct. 1 that rates may need to be raised even with unemployment near 10 percent.
Gold futures advanced to a record for a second day in New York on speculation that inflation will accelerate and as investors sought to hedge against a decline in the dollar.
Dollar Index
The Dollar Index, which IntercontinentalExchange Inc. uses to track the U.S. currency against those of six trading partners, fell for a fourth day, dropping 0.2 percent to 76.172.
Hoenig said yesterday increases to the Fed’s target rate for overnight bank loans wouldn’t derail the U.S. recovery. “I would not support a tight monetary policy in the current environment, but my experience tells me that we will need to remove our very accommodative policy sooner rather than later,” he said.
The yen advanced against all 16 most-traded currencies, rising 0.8 percent versus the dollar, after Japan’s Finance Minister Hirohisa Fujii said in an interview with the Wall Street Journal that the strength of the currency is “acceptable.”
The New Zealand dollar gained 0.5 percent against the U.S. currency to the highest level since July 30, 2008. The Canadian dollar traded at its strongest level since Sept. 30 last year.
Crude oil for November delivery rose 50 cents, or 0.7 percent, to $71.38 a barrel on the New York Mercantile Exchange at 9:28 a.m. London time, after the American Petroleum Institute yesterday reported declines in U.S. distillate fuel and crude oil stockpiles.
To contact the reporter on this story: Gavin Serkin in London at gserkin@bloomberg.net
