Emerging-market stocks slipped from a one-month high, led by energy producers, as concern a global recession will cut demand pushed oil and commodities prices lower and reduced the appeal of riskier assets.
The MSCI Emerging Markets Index (MXEF) declined 0.5 percent to 1,024.27 by 4:30 p.m. in New York, after reaching the highest level since April 6 yesterday. Brazil’s Bovespa Index fell on speculation Tim Participacoes SA may lose its chief executive officer. Russia’s Micex index retreated to the lowest level in almost four months as OAO Novatek and OAO Mechel extended losses for a third day.
Crude slid for a second day in New York as European Central Bank President Mario Draghi kept the region’s benchmark interest rate at a record low and said the economic outlook in the euro area had become “more uncertain.” Non-manufacturing industries in China, where the government is predicting the slowest economic growth since 2004, expanded at a slower pace in April than in March, while service industries in the U.S. also grew less last month, data today showed.
“The news flow in global markets has deteriorated sharply over the past few days, starting with the data,” Benoit Anne, the head of global emerging-markets strategy at Societe Generale SA in London, wrote in an e-mailed client note. “If this goes on, the fears of a global recession will resuscitate, and that will almost be the guarantee of a sharp sell-off in risky assets, including global emerging markets.”
The MSCI Emerging Markets gauge has added 12 percent this year and trades for 10.6 times estimated profit of member companies, data compiled by Bloomberg show. That compares with a multiple of 12.4 times for the MSCI World Index (MXWO) of developed countries, which has gained 8.6 percent in 2012.
The IShares MSCI Emerging Markets Index exchange-traded fund, the most-traded ETF (EEM:US) tracking developing-nation shares, fell 0.7 percent to $42.10 in New York. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM), a measure of options prices on the fund and expectations of price swings, rose 3.3 percent to 25.23.
Crude for June delivery fell $2.68 to settle at $102.54 a barrel on the New York Mercantile Exchange, the biggest percentage decline since Dec. 14. Prices have dropped 6.6 percent since closing at a peak of $109.77 a barrel on Feb. 24.
Draghi said at a press conference in Barcelona that the region’s economic forecast is subject to downside risks, though the ECB still expects a gradual economic recovery this year.
Brazil’s Bovespa (IBOV) fell 0.5 percent in Sao Paulo, the first loss in three days of trading. Tim Participacoes, the Brazilian unit of Telecom Italia SpA, declined 5.8 percent, the most since Aug. 8. Without attributing its source of information, magazine Veja, in an online column, reported Chief Executive Officer Luca Luciani may announce he will leave the company.
Gerdau SA (GGBR4), Latin America’s largest steelmaker, slid 2.5 percent after reporting first-quarter profit fell to 369.6 million reais ($193.7 million), compared with a median of 410 million reais from nine analyst estimates compiled by Bloomberg.
Gafisa SA, a Brazilian real estate developer, led gains in the Bovespa after it advanced 7.6 percent to 3.95 reais, the equivalent of $2.07. The company’s shares rose on speculation the Brazilian government will announce changes to savings account rules to facilitate deeper interest-rate cuts.
The Micex Index fell 0.2 percent in Moscow after OAO NovaTek, Russia’s second-largest gas producer, fell 3.6 percent to the lowest since February 2011. Bank of America Corp. cut the stock to neutral from buy, citing a government plan to raise taxes for independent gas producers.
Mechel, the country’s biggest coking-coal producer, dropped 3.8 percent. The company led declines in Russia’s benchmark gauge.
United Co. Rusal, the world’s largest aluminum producer, gained 1.7 percent as Barclays Capital initiated coverage of the stock with an equalweight recommendation, the equivalent of hold.
India’s Hero Motocorp Ltd. (HMCL) plunged 7.7 percent, the most since 2009, to 2,073.05 rupees, or the equivalent of $38.81. The New Delhi-based company posted fourth-quarter net income of 6.04 billion ($113 million) yesterday, compared with the 6.2 billion- rupee median of 48 analysts’ estimates compiled by Bloomberg.
India’s BSE India Sensitive Index (SENSEX) lost 0.9 percent, while the ISE National 100 Index (XU100) added 0.6 percent in Istanbul. Turkcell Iletisim Hizmetleri AS (TCELL), Turkey’s biggest mobile-phone operator, climbed 3.9 percent after saying that first-quarter profit climbed 56 percent, beating analysts’ estimates.
The FTSE/JSE Africa All Shares Index (JALSH) retreated 0.3 percent, while the BUX Index (BUX) fell 0.8 percent in Hungary.
Bank of China Ltd. and China Construction Bank Corp. (939) both slumped after Temasek Holdings Pte., Singapore’s state-owned investment company, sold $2.48 billion of shares in the lenders, according to documents obtained by Bloomberg News.
The Hang Seng China Enterprises Index (HSCEI) retreated 1.4 percent, the biggest loss in a week.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell four basis points, or 0.04 percentage points, to 338, according to JPMorgan Chase & Co.’s EMBI Global Index.
To contact the reporters on this story: Christine Harvey in New York at firstname.lastname@example.org; Jason Webb in London at email@example.com
To contact the editors responsible for this story: Emma O’Brien at firstname.lastname@example.org; Gavin Serkin at email@example.com