Bloomberg News

Emerging Stocks Slide as Greek Pushback Boosts Global Concerns

January 31, 2012

Jan. 30 (Bloomberg) -- Emerging-market stocks fell as Greece signaled it would reject oversight of its budget for aid and a report showed U.S. consumer spending stalled in December, deepening concern that global economic growth will slow.

The MSCI Emerging Markets Index declined 1 percent to 1,006.17 by 5 p.m. in New York, after climbing on Jan. 27 to the highest level since September. Brazil’s Bovespa Index slid 0.2 percent, extending a two-day decline, while benchmark measures fell at least 0.8 percent in Russia and South Africa. India’s Sensex Index slid 2.2 percent and the Shanghai Composite Index declined 1.5 percent after a week-long holiday hiatus.

Greek Finance Minister Evangelos Venizelos yesterday rejected reports of plans to appoint a commissioner to oversee implementation of the debt-stricken nation’s budget, citing “national dignity.” U.S. consumer spending was little changed in December, after rising 0.1 percent in November, indicating households in the world’s largest economy are focused on repairing finances instead of buying more goods.

“We could have a juncture here while markets digest everything going on in Europe,” said Michael A. Gayed, chief investment strategist in New York at Pension Partners LLC. “Investors are a little bit concerned with the speed at which emerging-market stocks have gained so far this year.”

The MSCI benchmark gauge for developing-market stocks has risen 9.7 percent this year, compared with the 4.5 percent gain in the MSCI World Index of developed-market equities and the 4.4 percent advance in the Standard & Poor’s 500 Index.

Petrobras, Bradesco

The Bovespa index sank as Brazilian raw-materials companies followed commodities prices lower. Petrochemicals maker Braskem SA slumped 2.8 percent and oil company Petroleo Brasileiro SA slid 0.4 percent to a one-week low as crude fell. Banco Bradesco SA lost 1.6 percent and Itau Unibanco Holding SA fell 1.7 percent after each was cut to “neutral” from “overweight” at JPMorgan Chase & Co.

YPF SA, Argentina’s largest oil company, slumped 11 percent, leading declines in the Merval index. Newspaper Pagina/12 reported that Argentine officials have discussed a takeover of the Repsol unit. A YPF press official, who asked not to be named in accordance with company policy, declined to comment.

Russia’s Micex Index fell 0.8 percent in Moscow and the FTSE/JSE Africa All Share Index also retreated 0.8 percent in South Africa.

OAO Sberbank, Russia’s biggest lender, dropped 2 percent, and Anglo American Plc, the diversified miner that accounts for 9 percent of the South African stock index, lost 2.1 percent.

The BUX Index retreated 1.1 percent in Budapest.

Turk Telekom

The ISE National 100 Index gained 0.8 percent in Istanbul. Turk Telekomunikasyon AS, Turkey’s largest phone company, added 1 percent after Reuters reported that the government of Qatar was looking at a possible takeover of the company’s parent, Oger Telecom Ltd.

Greece and its private creditors said on Jan. 28 that they expect to complete a deal in coming days after bondholders signaled they would accept European demands for a bigger cut in their debt holdings. The euro-region economy will contract by 0.5 percent this year, according to the median of 19 economist forecasts compiled by Bloomberg.

Greece’s failure to sufficiently implement reforms was “frustrating” and that the government in Athens and bondholders would have to step up their contribution should current debt-reduction plans prove insufficient, Chancellor Angela Merkel told reporters after a summit of European leaders yesterday in Brussels.

The median estimate of 77 economists surveyed by Bloomberg was for U.S. consumer spending to rise 0.1 percent last month.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose two basis points, or 0.02 percentage point, to 412 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

--With assistance from Weiyi Lim in Singapore. Editors: Marie- France Han, Emma O’Brien

To contact the reporters on this story: Belinda Cao in New York at lcao4@bloomberg.net; Jason Webb in London at jwebb25@bloomberg.net

To contact the editors responsible for this story: Emma O’Brien at eobrien6@bloomberg.net; Gavin Serkin at gserkin@bloomberg.net


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