Bloomberg News

Emerging Stocks Fall First Day in Six After U.S. Payrolls Data

September 02, 2011

Sept. 2 (Bloomberg) -- Emerging-market stocks fell for the first time in six days after hiring in the U.S. unexpectedly stagnated as U.S. employers became less confident in the recovery of the world’s largest economy.

The MSCI Emerging Markets Index retreated 1.6 percent to 1,021.88 at 5:26 p.m. New York time, trimming the week’s gain to 4.7 percent. Benchmark gauges in Russia and Poland dropped more than 2 percent, while those for South Africa and the Czech Republic declined more than 1 percent. Brazil’s Bovespa Index slumped the most in the Latin America region, and benchmarks in Mexico, Chile and Argentina also dropped.

The Labor Department said U.S. payrolls were unchanged in August, the weakest reading since September 2010, after an 85,000 gain in July that was less than initially estimated. Federal Reserve Chairman Ben S. Bernanke said on Aug. 26 that a second day has been added to the Fed meeting this month to “allow a fuller discussion” of the economy and policy options.

“In bad times, emerging markets always overreact,” Keith Springer, the president of Springer Financial Advisors in Sacramento, California, said in a phone interview. The job data has to do with “the major headwinds the economy, the government is facing. It’s going to give Bernanke more ammunition.”

The jobless rate held at 9.1 percent last month. The Fed’s minutes published this week showed some policy makers favored a “more substantial move” beyond an Aug. 9 pledge to hold rates at record lows through mid-2013.

Emerging Stocks Underperform

Developing countries’ equities have trailed their developed-nation counterparts this year, with the MSCI emerging- market index declining 11 percent. The MSCI World Index has lost 8.2 percent for the year. Emerging-market shares trade at 10.8 times estimated earnings, less than the 12.5 times for the MSCI World Index, according to data compiled by Bloomberg.

The WIG20 Index sank 2.3 percent in Warsaw. The Czech PX Index dropped 1.5 percent. The FTSE/JSE Africa All Share Index slid 1.8 percent in Johannesburg. Stocks in Moscow tumbled 2.3 percent as oil futures fell 2.8 percent in New York, the most in two weeks.

The Bovespa Index fell for the first time in six days, dropping 2.7 percent. B2W Cia. Global do Varejo, Brazil’s largest online retailer, tumbled 7.8 percent, leading declines among members in the benchmark gauge. Only four stocks rose while 31 fell on Mexico’s IPC Index. America Movil SAB, Latin America’s largest wireless carrier, slipped 2.1 percent.

Currencies Weaken

Most currencies across the emerging economies weakened versus the U.S. dollar, led by the Turkish Lira, which depreciated 1.7 percent. Brazil’s real fell 1.3 percent and the Mexican peso dropped 0.9 percent.

This week’s reduction in Brazil’s benchmark interest rate will help curb the appreciation of the real, and economic conditions are in place for further cuts in borrowing costs, Finance Minister Guido Mantega told reporters in Sao Paulo today.

Emerging-equity fund outflows slowed for the third week, Citigroup said. Funds investing in developing-nation stocks reported withdrawals of $600 million in the week ended Aug. 31, analysts led by Markus Rosgen said in a report today, citing figures compiled by EPFR Global. That compares with “peak” weekly outflows of $7.7 billion during the past month’s stock market rout, according to the report.

Getin Holding SA, the financial-services group controlled by Polish billionaire Leszek Czarnecki, declined 5.4 percent, the biggest two-day drop since February 2009. PKO Bank Polski SA, the country’s biggest bank, retreated 2.3 percent. OAO Gazprom, Russia’s gas export monopoly, and OAO Lukoil, its second-largest oil producer, followed oil prices lower.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries added seven basis points, or 0.07 percentage point, to 369, according to JPMorgan Chase & Co.’s EMBI Global Index.

China’s Shanghai Composite Index fell 1.1 percent, bringing its weekly loss to the biggest in three months, on speculation the government won’t ease policy measures to cool inflation even as economic and earnings growth slows.

--Editors: Marie-France Han, Glenn J. Kalinoski

To contact the reporter on this story: Belinda Cao in New York at Lcao4@bloomberg.net; Jason Webb in London at jwebb25@bloomberg.net

To contact the editor responsible for this story: Linda Shen at lshen21@bloomberg.net


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