Bloomberg News

Emerging-Market Stocks Fall Paring Weekly Gain on U.S. Report

June 03, 2011

June 3 (Bloomberg) -- Emerging-market stocks fell, paring a weekly gain by the benchmark index, as a report that U.S. employers added fewer jobs in May than forecast heightened concern that the world’s largest economy is weakening.

The MSCI Emerging Markets Index fell 0.3 percent to 1,155.51 as of 4 p.m. in New York, cutting this week’s gain to 0.7 percent. Russia’s Micex Index dropped 1.5 percent, Turkey’s ISE National 100 Index retreated 0.5 percent, India’s Bombay Stock Exchange Sensitive Index declined by 0.6 percent and Mexico’s IPC index fell 0.8 percent.

U.S. employers in May added the fewest number of workers in eight months and unemployment unexpectedly rose to 9.1 percent, according to a U.S. Labor Department report. U.S. payrolls increased by 54,000 last month, less than the 165,000 median forecast of economists surveyed by Bloomberg.

Concern about the U.S. economic recovery will impact emerging markets through the third quarter as China, Brazil and India act to slow domestic inflation, said Komal Sri-Kumar, chief global strategist at TCW Group Inc.

“So much for the emerging markets depends on where the United States economy goes in the next three months,” Sri-Kumar said in an interview from Los Angeles. “The emerging market fight against inflation is not yet finished, and food price inflation is particularly pernicious in China and India. In Brazil, we’re talking about a significantly overvalued currency.”

Brazil’s real fell 0.1 percent to 1.5763 per dollar, from 1.5750 yesterday. The currency gained 1.1 percent this week.

U.S. Rating

Moody’s Investors Service said yesterday that it will put the U.S. government’s Aaa credit rating under review for a downgrade unless there’s progress on increasing the debt limit by mid-July.

European Union and International Monetary Fund officials agreed to pay the next installment to Greece under last year’s 110 billion-euro ($161 billion) bailout, paving the way for an upgraded aid package that includes a “voluntary” role for investors.

OAO Gazprom, the world’s largest natural gas producer, was among the biggest decliners in Moscow, sliding 2.5 percent, its third straight drop. OAO Sberbank, Russia’s biggest lender, fell 1.8 percent.

Oil fell as much as 2.3 percent in New York to $98.12 a barrel. The Standard & Poor’s GSCI Index of raw materials rose 0.2 percent after earlier declining as much as 1.2 percent.

Brazil Credit

The Bovespa index rose 0.2 percent, advancing for a second day, as retailers advanced after Finance Minister Guido Mantega said the government doesn’t see the need for further measures to curb credit. Lojas Renner SA, Brazil’s biggest publicly traded clothing retailer, rose 4.1 percent leading gains by companies that depend on domestic demand.

The Lima General Index declined 2.3 percent two days before Peru will hold its presidential election. Congresswoman Keiko Fujimori is running even in polls with former army officer Ollanta Humala.

The FTSE/JSE Africa All Shares Index declined 0.9 percent.

Bank shares led stocks in Istanbul lower after inflation surged to 7.2 percent in May from 4.3 percent a month earlier, according to the statistics office in Ankara.

The Shanghai Composite Index gained 0.8 percent.

China’s inflation will probably peak at the end of this month, averting a hard landing for the economy, China Daily cited former Chinese central bank adviser Fan Gang as saying in Hong Kong yesterday.

The Taiex Index rose 0.6 percent in Taipei.

Emerging-market equity funds attracted about $820 million in the week ended June 1, snapping two consecutive weeks of outflows, Citigroup Inc. wrote in a report today, citing data from EPFR Global. In India, foreign investors became net buyers of the nation’s equities this year, data through June 1 showed.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell one basis point, or 0.01 percentage point, to 310 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

--With assistance from Leon Lazaroff in New York. Editors: Richard Richtmyer, Brendan Walsh

To contact the reporters on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net; Jason Webb in London at jwebb25@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


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