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Emerging Markets Gain, Aussie Hunt for High Yield

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Stocks in developing nations and high-yielding currencies rose on confidence central banks around the world will go out of their way to avoid jolting financial markets.

The MSCI Emerging Markets Index climbed to the highest in more than a year as prospects for a U.S. interest-rate hike this month remained subdued and investors awaited this week’s European Central Bank policy meeting. Currencies from South Africa and Australia were the biggest winners as the dollar weakened against most of its 16 major peers. Brent crude slipped toward $47 a barrel and copper advanced.

Emerging-market assets have gained ground since American payrolls data on Friday damped speculation the U.S. would raise rates in September, and there’s little sign of angst in financial markets. While investors look toward service sector on Tuesday and comments by Fed Bank of San Francisco President John Williams for insight on tightening U.S. monetary policy, central banks across much of Asia and Europe are in the midst of easing cycles.

“Monetary policy is going to remain easy around the world and that will continue to be supportive of risk assets,” said James Woods, a strategist at Rivkin Securities in Sydney. "The non-farm payrolls last week indicate there’s no rush for the Fed to raise rates.”

Stocks

The MSCI Emerging Markets Index rose 0.9 percent at 10:02 a.m. in London, extending this year’s gain to 15 percent. That compares with a 4.6 percent year-to-date advance for the MSCI World Index of developed countries.

The Bank of America Merrill Lynch GFSI Market Risk Index, a measure of future price swings implied by options trading on global equities, interest rates, currencies and commodities, fell to the lowest level since the start of the year.

The Stoxx Europe 600 Index was little changed, with trading volumes 35 percent less than the 30-day average. Futures on the S&P 500 Index added 0.1 percent, after the gauge rose 0.4 percent on Friday.

Bayer AG sweetened its takeover bid for Monsanto Co. for the second time, saying it would be prepared to pay $127.50 a share for the U.S. seed giant provided a negotiated deal can be reached. Monsanto ended last week at $107.44 in New York.

Currencies

The Bloomberg Dollar Spot Index lost 0.2 percent for the second day in a row. The yen reversed earlier losses to trade 0.1 percent firmer versus the greenback. The Bank of Japan should refrain from stepping up monetary stimulus until after the Fed decides on interest rates, according to Koichi Hamada, an economic adviser to Prime Minister Shinzo Abe.

South Africa’s rand climbed 1.1 percent, the most among major currencies. The Aussie appreciated 0.9 percent, the second-best performance. The Reserve Bank of Australia kept its benchmark interest rate at 1.5 percent in Governor Glenn Stevens’s final meeting, a decision forecast by all 26 economists in a Bloomberg survey.

South Korea’s won and Taiwan’s dollar were both near two-week highs, with the latter advancing 0.3 percent. India’s rupee climbed to a four-month high, trading for the first time since Urjit Patel took over as governor of the central bank.

"Asian currencies will be especially sensitive to comments from various Fed speakers this week," said Khoon Goh, head of regional research at Australia & New Zealand Banking Group Ltd. in Singapore. "Any talk of September still being live should see Asian currencies give up some of their recent gains."

Source:Bloomberg