Emerging Stocks Fall 1st Time in 5 Days on Europe Banks, Currencies Slide

Emerging-market stocks retreated for the first time in five days and currencies depreciated as investors speculated European banks may need to raise more capital and commodity prices declined.

The MSCI Emerging Markets Index slipped 0.6 percent to 1,006.14 by 5 p.m. in New York, snapping a 4.3 percent rally during the previous four days that had sent the gauge to a four- week high. Hungary’s biggest bank, OTP Bank Nyrt, slid 3.4 percent. Russian stocks lost the most in two weeks and Mexico’s IPC index fell for the first time in six days as oil and metals prices fell.

European bank stress tests published in July understated sovereign debt holdings at some financial institutions, the Wall Street Journal reported. The Association of German Banks also said yesterday the nation’s 10 biggest lenders may need about 105 billion euros ($134 billion) in fresh capital.

“There was a lot of press on European Union debt worries,” said Christopher Shiells, an analyst at Informa Global Markets in London. “That seems to have resurfaced again,”

Hungary’s forint depreciated 1.1 percent versus the euro and 2.7 percent against the Swiss franc. Two-thirds of Hungary’s overall household credit is in foreign currencies, of that, 82 percent is in Swiss francs, according to central bank data. The ruble weakened 0.8 percent against the dollar, the most in a month, as crude sank. Oil lost 0.7 percent to $74.09 a barrel in New York. Copper retreated 0.8 percent. The South African rand depreciated 0.6 percent as copper and metal prices slid.

Won Slips

South Korea’s won depreciated 0.5 percent against the dollar from its strongest level in four weeks. Policy makers were suspected of buying dollars in the foreign-exchange market yesterday, said Ha Joon Woo, a currency dealer at Daegu Bank in Seoul.

The difference between the yield investors demand from bonds sold by emerging-market governments and U.S. Treasuries advanced 12 basis points to 288, according to the JPMorgan Chase & Co. EMBI+ index. The spread rose by 15 basis points for Russian debt and 13 for Turkish bonds.

OAO Gazprom, the world’s biggest natural gas producer, lost 0.9 percent, its biggest fall in two weeks. OAO Sberbank, Russia’s biggest lender, retreated 2.2 percent.

Hungary’s BUX Index fell 1 percent and the Micex index slid 0.7 percent. The Shanghai Composite Index was little changed.

‘Further Upside’

Maanshan Iron & Steel Co. jumped 10 percent in Shanghai. Posco, the world’s third-biggest steelmaker, rose 4.5 percent in Seoul, while Hyundai Steel Co. climbed 5.1 percent and Dongkuk Steel Mill Co. added 2.9 percent.

U.S. President Barack Obama proposed spending at least $50 billion to rebuild 150,000 miles (241,400 kilometers) of roads, construct and maintain 4,000 miles of rail and overhaul 150 miles of runways.

The rally for China’s steelmakers and metal prices has “further upside” as the Chinese government introduces stricter policies to reduce energy consumption by the end of the year, JPMorgan Chase & Co. said in a report.

To contact the reporters on this story: Michael Patterson in Hong Kong at mpatterson10@bloomberg.net; Jason Webb in London at jwebb25@bloomberg.net.

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