(Bloomberg) -- Emerging-market stocks rose the most in 11 weeks, currencies strengthened and borrowing costs fell to a 14-month low as the Federal Reserve's new round of stimulus measures boosted confidence in the global economy.
The MSCI Emerging Markets Index advanced 3 percent to 1,011.28 at 8:45 a.m. in New York, climbing for a seventh day in the longest winning streak since October. Russia's Micex Index surged 4 percent and was poised to enter a bull market as oil hit $100 a barrel in New York. Currencies of Russia, India and Malaysia rose more than 1 percent. The extra yield on emerging- market debt over U.S. Treasuries fell to 2.85 percentage points, the lowest since July 2011, according to JPMorgan Chase & Co.
The Fed announced a third round of asset purchases yesterday, pledging for the first time that it will buy bonds until the economy recovers and keep the benchmark interest rate near zero until at least the middle of 2015. The "powerful" stimulus may spark a rally in emerging-market assets similar to the first quarter, when the MSCI index jumped more than 13 percent and currencies strengthened, said Societe Generale SA.
"Stimulating U.S. jobs growth and economic expansion will provide the global economy with a strong boost that will benefit emerging markets," said Allan Yu, who helps manage about $9.5 billion at Manila-based Metropolitan Bank & Trust Co. "This will also benefit equities as it will provide liquidity."
Zhaojin Mining Industry Co. jumped 16 percent in Hong Kong, the most in the MSCI index, as a weaker dollar boosted commodity prices. OAO Severstal, Russia's second-largest steel producer, rose 7.9 percent. Daewoo Securities Co., a Seoul-based broker, surged the most since October 2008 on speculation investor demand for equities and fixed-income securities will increase.
The Fed's open-ended asset purchases follow the European Central Bank's Sept. 6 announcement of an unlimited bond-buying program to combat the region's debt crisis and China's approval of proposals to build rail, roads and urban infrastructure.
The 21 countries in the MSCI index send about 30 percent of their exports to the European Union and 13 percent to the U.S. on average, according to the World Trade Organization.
"We will have to see further down the road how effective these measures are, but for now it's a good signal that authorities in the U.S., Europe and China are taking steps to avert a slowdown," Metropolitan Bank's Yu said.
The MSCI gauge headed for its biggest gain on a closing basis since June 29 and climbed to the highest level since May 4. The index extended its weekly gain to 4.4 percent, set for the biggest advance since the period ended Jan. 20. It has jumped 15 percent from this year's low on June 4.
The Hang Seng China Enterprises Index led gains among Asian emerging-market equity gauges today, jumping 3.7 percent. The Micex was poised for its biggest advance since October, while South Korea's Kospi increased 2.9 percent, the most in nine months. Gauges in Poland and Hungary rose more than 2.5 percent.
The extra yield investors demand to own emerging-market dollar bonds over U.S. Treasuries dropped 10 basis points, or 0.10 percentage point, according to JPMorgan's EMBI Global Index. The Markit iTraxx SovX CEEMEA Index of east European, Middle Eastern and African credit-default swaps tumbled 14 basis points to 195, the lowest level since July 2011.
The cost to insure Egyptian government debt against non- payment dropped to a one-year low as the nation's main Islamist groups sought to ratchet down tensions with the U.S.
Egypt credit default swaps declined 15 basis points to 398, the lowest level on a closing basis since September 2011, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
Yields on Turkey's benchmark two-year notes declined 11 basis points to 7.26 percent and Hungary's two-year yields retreated 7 basis points to 6.58 percent to lead declines in local-currency debt of emerging markets.
"With the powerful policy signal sent by the Fed, we believe that the risk-on lights are going to flash green for quite some time ahead," Benoit Anne, the head of emerging- market strategy at SocGen in London, wrote in an e-mailed note.
Global equity funds attracted $12.1 billion in the week ended Sept. 12, the largest inflow this year, Citigroup Inc. analysts led by Markus Rosgen wrote in a report today, citing data compiled by EPFR Global. About $390 million was invested in emerging-stock funds amid speculation the Fed would introduce its third round of asset purchases, according to the report.
All 10 industry groups in the MSCI index advanced at least 1 percent. Financial and energy companies contributed most to the gauge's rally.
All On Wall Street articles are archived after 7 days. REGISTER NOW for unlimited access to all recently archived articles, as well as thousands of searchable stories. Registered Members also gain access to exclusive industry white paper downloads, web seminars, blog discussions, the iPad App, CE Exams, and conference discounts. Qualified members may also choose to receive our free monthly magazine and any of our daily or weekly e-newsletters covering the latest breaking news, opinions from industry leaders, developing trends and growth strategies.