Emerging-market stocks fell to a one-week low and currencies weakened after the World Bank and Germany cut economic growth forecasts and India’s central bank chief tempered expectations for monetary stimulus.
Tata Motors Ltd. (TTMT) sank by the most since Oct. 30 after sales of its Jaguar and Land Rover units dropped below estimates. OAO Gazprom and OAO Novatek, Russian natural-gas producers, dropped the most in at least a month, while Brazilian port operator LLX Logistica SA tumbled. Anglo American Platinum Ltd. (AMS), South Africa’s largest producer of the metal, slumped as employees at three of its mines refused to go to work. The Hungarian forint and Brazilian real led currency losses among emerging markets.
The MSCI Emerging Markets Index (MXEF) lost 0.2 percent to 1,071.21 in New York, the lowest close in eight days. The World Bank projected the global economy will expand 2.4 percent this year, down from a June forecast of 3 percent, and Germany cut its growth outlook to 0.4 percent from 1 percent. While India’s inflation rate remains “quite high,” the scope for monetary and fiscal stimulus is limited, Reserve Bank of India Governor Duvvuri Subbarao said yesterday.
“Risk assets in emerging markets are more vulnerable to the swing in the global economy,” said Li Jun, a strategist at Central China Securities Co. in Shanghai. “Slower growth will hurt profitability in emerging-nation companies more than those in developed countries given the proportion of exports in their economies.”
The Washington-based lender now sees developed economies growing 1.3 percent this year, the same as last year, compared with a 1.9 percent forecast in June. Developing countries are projected to expand 5.5 percent, less than the 5.9 percent forecast in June.
A government report today showed U.S. consumer prices were unchanged in December from November. U.S. industrial production rose 0.3 percent, climbing for a second month in December as demand picked up for business equipment. Manufacturing grew 0.8 percent, more than forecast. The U.S. economy picked up across much of the country in December, boosted by auto and home sales, the Federal Reserve said in its Beige Book business survey, which is based on reports from the Fed’s district banks.
The 21 nations in MSCI’s developing-nations gauge send about 17 percent of their exports to the U.S. and 26 percent to the European Union on average, data compiled by the World Trade Organization show.
The iShares MSCI Emerging Markets Index (EEM:US) exchange-traded fund, the ETF tracking developing-nation shares, slipped 0.1 percent to $44.43. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM), a measure of options prices on the fund and expectations of price swings, was little changed at 17.24.
Brazil’s Bovespa (IBOV) Index rose 0.1 percent, reversing earlier declines. Online retailer B2W Cia. Global do Varejo jumped 4 percent to lead gains by companies that depend on domestic demand after data from the central bank signaled the Brazilian economy expanded at a faster pace than analysts had forecast in November. LLX, headed by billionaire Eike Batista, fell 4.3 percent to the lowest price since Dec. 28 after it was downgraded to neutral from overweight at JPMorgan.
Russia’s Micex Index was little changed as Novatek fell 2.7 percent in Moscow to the lowest since Nov. 29. Gazprom, the world’s largest natural gas producer, retreated 1.1 percent. South Africa’s benchmark gauge slid 0.1 percent.
The BSE India Sensitive Index (SENSEX) declined 0.8 percent, the most in more than three weeks, as ICICI Bank Ltd., India’s third-biggest lender, sank 2 percent. India’s financial system has been made vulnerable by a deterioration in bank assets and a lack of capital as the economy slowed, the International Monetary Fund said in a statement yesterday. Tata Motors fell 3.5 percent in Mumbai.
“I’m bearish in absolute and relative terms for 2013 as a whole” about emerging markets, John-Paul Smith, a strategist at Deutsche Bank AG in London, said by e-mail.
The Shanghai Composite Index (SHCOMP) of domestic Chinese shares lost 0.7 percent after a report showed foreign direct investment dropped last month. Taiwan’s Taiex (TWSE) Index slid 0.8 percent, the most since Dec. 21.
Chinese equities fell for a second day in New York, led by Trina Solar Ltd., after the World Bank cut the nation’s 2013 economic growth forecast to 8.4 percent from a June estimate of 8.6 percent. The Bloomberg China-US Equity index (CH55BN) of the most- traded Chinese shares in the U.S. dropped 0.6 percent to the lowest price in a week.
The Hungarian forint weakened 0.2 percent versus the euro, while Brazil’s real depreciated 0.3 percent against the dollar. South Korea’s won fell a third day on concern authorities will take steps to stem the currency’s recent gains. China’s yuan slid from a 19-year high after the central bank cut the currency’s reference rate by the most in four months.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell one basis point, or 0.01 percentage point, to 266 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.
The emerging-markets gauge has risen 1.5 percent this year, trailing a 3 percent gain by the MSCI World Index (MXWO) of developed- country stocks. The measure trades at 10.9 times estimated earnings, compared with the MSCI World’s multiple of 13.3, data compiled by Bloomberg show.
The MSCI Emerging Markets/Information Technology Index was the worst performer among 10 industry groups in the benchmark gauge, falling 0.7 percent to the lowest level in a week. Utilities companies gained, adding 0.5 percent.
La Guardia Airport
Anglo American Platinum sank 5.9 percent, the most since Sept. 26. Workers at three mines refused to go to work after the company said jobs may be cut as part of a restructuring. Anglo American Plc (AGL) dropped 2 percent in Johannesburg as the African National Congress said South Africa’s government should withdraw the firm’s platinum licenses.
TAV Havalimanlari Holding AS (TAVHL), Turkey’s biggest airport operator that runs the country’s Ataturk airport, rose 2.6 percent in Istanbul, the highest close since July 2007. TAV’s Chief Executive Officer Sani Sener said the company will bid for operating rights at New York City’s La Guardia airport, according to a CNBC-e report. The nation’s ISE National 100 benchmark index rallied 2 percent to the highest level on record.
Franshion Properties China Ltd. (817) dropped 1.7 percent, the most in a week in Hong Kong, while the Shanghai Stock Exchange Property Index declined 2 percent. China should “gradually” establish a property taxation system that covers trading and ownership, Premier Wen Jiabao said yesterday.
Pakistan’s global bonds fell for a fourth day after the Supreme Court ordered the arrest of Prime Minister Raja Pervez Ashraf over corruption allegations, while protesters in Islamabad called for the administration to quit.
Venezuela’s credit outlook was cut to negative yesterday from stable by Moody’s Investors Service as President Hugo Chavez’s struggle to recover from cancer in Cuba heightens political and economic risks. Yields on Venezuela’s bonds expiring in September 2027 rose 2 basis points, or 0.02 percentage point, to 9.34 percent.
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