Emerging-market stocks declined from a one-week high after Chinese Premier Wen Jiabao warned of a “severe” jobs outlook and amid concern corporate earnings growth is slowing.
The MSCI Emerging Markets Index fell 0.2 percent to 930.90 at the close of trading in New York, snapping a three-day advance. The benchmark index pared some of its retreat after housing starts in the U.S. approached a four-year high. Mining company Vale SA (VALE5), whose biggest export market is China, was among companies falling in Brazil. Inotera Memories Inc. (3474) tumbled to a five-month low after the Taiwanese chipmaker reported a loss and as Intel Corp., the world’s largest semiconductor maker, cut its forecast.
Wen’s comments yesterday about the labor situation underscored concern that China’s weakest economic growth since 2009 will lead to increasing job losses. Intel Chief Financial Officer Stacy Smith said slower spending in Europe and the U.S. as well as weaker growth in China forced the company to reduce its sales target for the year. Beginning construction of U.S. homes rose more than forecast in June, indicating a brighter outlook for the residential real estate market.
“Investors are concerned that China may be facing a hard landing as economic activity has been decelerating,” Morgan Harting, a portfolio manager at AllianceBernstein Investments Inc., managing about $100 million in assets, said by phone. “Economic trends in the U.S. and China are central to any view on emerging markets.”
MSCI’s index of developing nations has gained 1.6 percent this year. The gauge trades at a multiple of 10.1 times estimated earnings, compared with 12.4 for the MSCI World Index of developed nations, according to data compiled by Bloomberg.
EM ETF Slides
The IShares MSCI Emerging Markets Index exchange-traded fund, the ETF (EEM:US) tracking developing-nation shares, lost 0.3 percent to $38.81. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM), a measure of options prices on the fund and expectations of price swings, tumbled 2.4 percent at 24.11.
Housing starts rose 6.9 percent last month to a 760,000 annual pace after a revised 711,000 rate in May that was faster than initially estimated, the Commerce Department reported today in Washington. The median forecast of 79 economists surveyed by Bloomberg News called for a 745,000 rate.
“When housing numbers and jobs numbers are good, that means we are buying more goods that are made in emerging countries, which is good for their economies,” Harting said.
Vale fell for a third day, losing 0.4 percent. The Bovespa stock index gained 1.2 percent, advancing for a second day as homebuilders rose on speculation that an economic recovery in Brazil will boost earnings.
China Overseas Land & Investment Ltd. (688), the biggest Hong Kong-listed mainland developer by value, fell 4 percent, the biggest drop since May 31.
China’s home-price rebound makes it more difficult for the government to loosen policies aimed at restricting gains in the property sector, said Nomura Holdings Inc. economist Zhang Zhiwei. Prices climbed in 25 cities out of the 70 the government looks at and fell in 21 from a month earlier, according to data released by the statistics bureau today.
The Shanghai Composite Index (SHCOMP) rose 0.4 percent at the close, rebounding in the last hour of trade on speculation the government will announce measures to boost the economy. The gauge earlier slumped as much as 1 percent to a near three-year low after Wen’s comments on the nation’s labor situation.
The FTSE/JSE Africa All Share Index (JALSH) climbed 1 percent in Johannesburg. Famous Brands Ltd. (FBR), a South African owner of fast- food outlets, jumped 5.7 percent from a one-month low.
A gauge of technology stocks fell 1.3 percent, the most among 10 industry groups in the MSCI Emerging Markets Index. (MXEF)
Inotera slid 6.9 percent in Taipei after the company reported a net loss of NT$2.98 billion in the second quarter, its ninth consecutive quarterly loss. SK Hynix Inc. (000660), the world’s No. 2 computer-memory chipmaker, retreated 4.9 percent in Seoul.
Intel’s revenue will rise 3 percent to 5 percent in 2012, the company said in a statement yesterday. That was lower than an earlier projection for a gain at a percentage in the high single digits.
India’s rupee weakened 0.7 percent, the most among emerging-market currencies.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries was unchanged at 347, according to JPMorgan Chase & Co.’s EMBI Global Index.
To contact the reporters on this story: Sridhar Natarajan in New York at email@example.com; Jason Webb in London at firstname.lastname@example.org.
To contact the editor responsible for this story: Gavin Serkin at email@example.com