Emerging market stocks and currencies rallied on Friday, backed by stronger-than-expected US consumer spending and sentiment data that pushed investors to put cash to work in higher-yielding markets. Friday's data follows upbeat US trade data on Thursday as well as a surge in Chinese industrial output to its fastest pace since June 2007.
At the same time, concerns over Dubai's debt crisis are waning as it appears to have a low threat of spreading beyond the borders of the United Arab Emirates. MSCI's broad emerging markets stock index was up 0.81 percent, while the Latin American index rose 1.22 percent.
"It is very clear the sentiment in equities and currencies in the LatAm space is positive, but there isn't much conviction in the trade. It is being driven by the US data," said Benito Berber, Latin America strategist at RBS in Stamford, Connecticut. US retail sales increased 1.3 percent last month, the largest advance since August and better than the 0.7 percent gain forecast by economists.
University of Michigan Surveys of US Consumers said its preliminary index of sentiment for December rose to 73.4, just a touch below the year's high set in September. The data prompted investors spread their cash into countries with higher-yielding assets.
Brazil's real rose 0.46 percent against the US dollar to 1.7580 Next week Brazil's central bank releases the minutes from Wednesday's monetary policy meeting when it left interest rates unchanged at 8.75 percent. This was followed a day later by a disappointing third-quarter gross domestic product, which came in at 1.3 percent versus estimates for 2 percent growth.
"It is important because the local market is pricing in a hike in January, but then GDP came out lower than expected, so there is a conflict there," said Berber. The Mexican peso gained 0.82 percent to 12.842 per greenback. "This shows that consumption in (the United States) is growing, which is positive for the Mexican economy," wrote Gabriela Siller, an analyst at brokerage Base Internacional in Monterrey, in a note to clients.
Mexico, which sends about 80 percent of its exports to the United States, is counting on a solid rebound in US demand to fuel its own recovery from a deep recession. Sovereign credits in emerging markets were firmer, but only just, with declines in benchmark bonds from Brazil and Turkey.
The benchmark J.P. Morgan Emerging Markets Bond Index Plus showed yield spreads for sovereign bonds tighter by 9 basis points to 299 basis points over US Treasuries. In the Middle East, investors are waiting for December 14 when the $3.5 billion Islamic bond issued by Nakheel is due for redemption. Nakheel is the property arm of state-owned Dubai World.
The bond is seen as the litmus test for a $26 billion debt restructuring announced by the emirate, and some market players said speculation is growing the bond could be paid on time. Nakheel's Islamic bond on Friday last traded around 53.75 cents to the dollar after falling as low as 40 last week, according to Reuters data.
Comments
Comments are closed.