(Bloomberg) -- Developing world stocks climbed on Wednesday, with stimulus-driven China shares offsetting risks over further escalation of conflict in the Middle East.
The MSCI gauge for emerging-market stocks rallied as much as 1.8% to trade at the highest level in more than two years. The Hang Seng China Enterprises Index climbed as much as 8.5% before closing up 7.1%, a 13th straight day of gains. Technology shares led gains. A gauge for EMEA region stocks, however, dropped for a third day over tensions between Israel and Iran.
“Markets were jolted by the deterioration in the security situation in the Middle East,” said Rajeev De Mello, chief investment officer at Gama Asset Management SA. “Though, as has been the case over the past year, the conflict seems contained so far, so the impact on markets has been minor”.
Israel’s Benjamin Netanyahu vowed to retaliate against Iran after it fired about 200 ballistic missiles at Israel in a severe escalation of hostilities between the adversaries that world powers fear could spiral into a Middle East-wide war.
“While oil rose, stocks fell and Treasuries rallied a bit, gold is giving us the signal that markets are already fading the reaction. I would expect further containment to lead to a reversal in the geopolitical risk-off trades,” De Mello added. Bullion traded around $2,650 an ounce after closing 1.1% higher in the previous session.
An MSCI index for emerging-market currencies fell for a second day while emerging Asia currencies led declines. The Mexican peso outperformed.
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