Developing-nation stocks fell, pushing the benchmark index down the most in two months, as falling commodities prices dragged down resource stocks and a U.S. Federal Reserve official said debt purchases probably won’t spur growth.
The MSCI Emerging Markets Index (MXEF) retreated 1.1 percent to 990.37 at the close of trading in New York, the biggest decline since July 23. Energy and raw-materials companies sank the most among 10 industry groups as oil tumbled. Brazil’s Bovespa index was little changed, sliding less than 0.1 percent. China’s benchmark index fell to a three-year low while equity gauges in Russia and the Czech Republic lost more than 2 percent as concern deepened that Spain will struggle to resolve its debt crisis.
New bond buying announced by the Fed this month probably won’t boost growth in the world’s largest economy and may jeopardize the central bank’s credibility, Fed Bank of Philadelphia President Charles Plosser said yesterday. While the MSCI index jumped 3.3 percent the day after the Fed announced its third round of asset purchases on Sept. 13, the gauge has since retreated 2.3 percent.
“Emerging market equities got a boost from quantitative easing measures, but in the last week we’ve seen it fade,” Morgan Harting, a portfolio manager at AllianceBernstein Investments Inc., managing about $100 million in assets, said by phone from New York. “Reality is setting in that the underlying economic trends are weak.”
Economic research indicates that additional asset purchases are “unlikely to reduce long-term interest rates by a significant amount” and that lowering rates “by a few more basis points” won’t spur growth and hiring, Plosser, who doesn’t have a vote on Fed policy this year, said yesterday.
EM ETF Slumps
The iShares MSCI (EEM:US) Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, fell 0.5 percent. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, rose 3.4 percent.
The 21 nations in the MSCI index send about 13 percent of their exports to the U.S. on average, according to the World Trade Organization. The emerging-market gauge has climbed 5.7 percent so far this quarter, compared with a 5.2 percent increase in the Standard & Poor’s 500 Index.
The Bovespa extended yesterday’s losses amid concern that a worsening debt crisis in Europe will curb demand for Brazilian equities. Mining company MMX Mineracao & Metalicos SA (MMXM3) followed metals lower, declining 1.9 percent to a three-week low. Fibria Celulose SA (FIBR3), the world’s largest pulp maker, sank 6.3 percent.
The UBS Bloomberg CMCI index of 26 raw materials tumbled 1.2 percent.
The Shanghai Composite Index retreated 1.2 percent today to the lowest level since January 2009. BYD Co., the Chinese carmaker partly owned by Warren Buffett’s Berkshire Hathaway Inc., sank 9.8 percent in Hong Kong after CLSA Asia Pacific Markets cut its price estimate by 94 percent.
Russia’s Micex plunged 2.5 percent and the ruble weakened 0.9 percent against the dollar.
“The string of weak economic data globally has continued to weigh on emerging markets in recent sessions,” Nick Chamie, global head of foreign-exchange strategy and emerging markets research at Royal Bank of Canada, said in a phone interview from Toronto. “The ongoing concerns around Europe seem to be dragging down sentiment.”
OAO Gazprom, Russia’s gas-export monopoly, dropped 2.1 percent and PetroChina Co., China’s largest oil producer, sank 1.2 percent. KGHM Polska Miedz SA, Poland’s sole copper producer, declined 1.3 percent. Oil tumbled 1.5 percent in New York, reaching the lowest level since Aug. 2.
The extra yield investors demand to own emerging-market dollar bonds over U.S. Treasuries increased five basis points, or 0.05 percentage point, to 309, according to JPMorgan’s EMBI Global Index.
Spanish 10-year bond yields climbed above 6 percent. The leader of Spain’s richest region called early elections yesterday, seeking greater autonomy after Prime Minister Mariano Rajoy rejected his demand for increased control of the region’s revenue. Police clashed with protesters in Madrid yesterday as Rajoy struggles to persuade Spaniards to accept the severest austerity measures on record.
AngloGold Ashanti Ltd. (ANG) sank 5.1 percent in Johannesburg. The world’s third-largest gold producer halted production at all its South African mines as more workers went on strike.
China Vanke Co. and Poly Real Estate Group Co., the nation’s biggest developers, dropped more than 1.3 percent after the southern city of Guangzhou restricted sales of homes before they are completed.
To contact the reporters on this story: Michael Patterson in London at email@example.com; Weiyi Lim in Singapore at firstname.lastname@example.org.
To contact the editors responsible for this story: Darren Boey at email@example.com