Bloomberg News

Emerging Stocks Fall for Third Day on U.S., Europe Debt Concern

July 29, 2011

July 29 (Bloomberg) -- Emerging-market stocks declined for a third straight day and borrowing costs rose as concern grew that debt crises in the U.S. and Europe may curb the global economic expansion.

The MSCI Emerging Markets Index decreased 0.7 percent to 1,137.73 at 5 p.m. in New York, the lowest since July 20. A three-day slide brought this week’s retreat to 1.3 percent. The gauge is down 0.7 percent this month. Russia’s Micex gauge lost 0.9 percent. Most Asian stocks dropped as benchmarks in Taiwan and Korea declined the most.

The U.S. reported less-than-forecast economic growth in the second quarter as consumers retrenched. The House passed Speaker John Boehner’s plan to raise the U.S. debt limit and cut spending, a bill Senate Democrats say they will kill as they press for an alternative approaching an Aug. 2 deadline to avoid default.

Malaysia’s ringgit and the Turkish lira weakened the most versus the greenback in developing-nation currencies. The lira fell as much as 1.3 percent after the nation reported a record trade deficit for June and four top military generals resigned amid tensions with the Prime Minister over alleged military plots to undermine his government.

“Investors are taking a defensive stance,” said Paul Joseph Garcia, who helps manage $15 billion at Manila-based Bank of the Philippine Islands.

‘Negligible’ Inflows

Mutual funds invested in emerging-market stocks attracted a “negligible” $266 million inflow in the week ended July 27, Citigroup Inc. analysts led by Markus Rosgen wrote in a report today, citing figures compiled by EPFR Global. That compares with a withdrawal of $1.1 billion in the week ended July 20.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries increased nine basis points, or 0.09 percentage point, to 303, according to JPMorgan Chase & Co.’s EMBI Global Index.

Powertech Technology Inc. slumped the most since December 2008 in Taipei while Taiwan Semiconductor Manufacturing Co. fell after reporting lower profit.

Vale SA, the world’s largest iron-ore producer, lost 1.4 percent, the most in three weeks, as its second-quarter profit missed analysts estimates. Gol Linhas Aereas Inteligentes SA sank after Brazil’s second-biggest airline by market value cut some of its 2011 forecasts and was downgraded by banks. Gol plunged 22 percent, the most since its 2004 initial public offering.

India’s Bombay Stock Exchange Sensitive Index slipped 0.1 percent, ending July with a 3.4 percent decline, its biggest monthly loss since January. China’s Shanghai Composite Index slipped 0.3 percent today.

U.S. Growth

U.S. gross domestic product rose at a 1.3 percent annual rate in the second quarter, Commerce Department figures showed today. That was less than the 1.8 percent median forecast of economists surveyed by Bloomberg News. Household purchases, about 70 percent of the economy, climbed 0.1 percent.

Moody’s is reviewing Spain’s Aa2 classification, the ratings company said in a statement today. A cut would probably be “limited to one notch,” the agency said. Spain, the euro region’s fourth-largest economy, is trying to rein in a surge in borrowing costs and convince investors it won’t follow Greece, Ireland and Portugal in seeking an international bailout.

--With assistance from Michael Patterson in London. Editors: John Kohut, Ana Monteiro, Marie-France Han

To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net Belinda Cao in New York at lcao4@bloomberg.net

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


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