Emerging stocks advance to 3-month high as Europe concerns ease

Aug. 6 (Bloomberg) -- Emerging-market stocks rose to the strongest level in almost three months as concern over Europe’s debt crisis eased and as better-than-estimated U.S. corporate earnings boosted the outlook for exporters.

The MSCI Emerging Markets Index climbed 1.5 percent to 967.43 as of 12:28 p.m. in New York, poised for its highest close since May 11. Brazil’s Bovespa index advanced as steelmaker Usinas Siderurgicas de Minas Gerais SA’s 12-month price target was boosted by Goldman Sachs Group Inc. Benchmark indexes gained more than 1 percent in China, Russia, South Korea and India.

Bank of Italy Governor Ignazio Visco suggested the European Central Bank may be willing to counter further signs of a slowdown by cutting interest rates, daily La Repubblica said. The 21 countries in the MSCI gauge send about 30 percent of their exports to the European Union on average, data compiled by the World Trade Organization show. Warren Buffett’s Berkshire Hathaway Inc. rose as profit beat projections. China regulators broadened measures to boost investor confidence.

“Investors appear to be less worried about a deep recession as a result of Europe’s troubles,” Greg Lesko, who helps oversee about $700 million at Deltec Asset Management in New York, said in a telephone interview. “U.S. corporate earnings have been a major positive, and China has been making efforts but growth there has been a mixed bag, so until that changes, it’s hard to feel this is a sustainable rally.”

China cut interest rates in June and July, the first reductions since 2008, and is encouraging local governments to boost investment as economists forecast 2012 growth will be the slowest in 13 years.

Kospi Index

Visco told La Repubblica in an interview published yesterday that markets initially misunderstood ECB President Mario Draghi’s Aug. 2 comments.

“Not only did the ECB not take any steps backward, but it took decisive steps forward to correct the functioning of monetary policy transmission, and therefore of the stability of the single currency,” he told the newspaper.

South Korea’s Kospi index surged 2 percent, the biggest gain among benchmark indexes in emerging markets today, while the won rose 0.5 percent. The Shanghai Composite Index had its best two-day rally since May as regulators broadened measures to boost confidence in stocks.

The Bovespa index rose 1.7 percent despite a surprise quarterly loss by oil company Petroleo Brasileiro SA as indications of European easing boosted the outlook for Brazilian raw-materials exports.

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