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Emerging Stocks Drop to Eight-Week Low on Greece, Goldman Cuts

Emerging-market stocks fell, sending the benchmark index to an eight-week low, as concern over Greece’s debt crisis deepened, Goldman Sachs Group Inc. lowered its rating on South Korean shares, and oil dropped.

The MSCI Emerging Markets Index retreated 0.7 percent to 1,136.66 as of 5:17 p.m. New York time, the lowest close since March 24. South Korea’s Kospi Index (KOSPI) slipped 0.8 percent to its lowest since April 12 and the Shanghai Composite Index dropped 0.8 percent. Russia’s Micex Index slid 0.6 percent as oil fell in New York.

Emerging-market stocks dropped for a fourth day on concern the European debt crisis and China’s efforts to curb inflation will slow global growth. European finance chiefs endorsed a 78 billion-euro ($111 billion) bailout for Portugal in Brussels today as they stepped up pressure on Greece to do more to win improved aid terms.

“As far as the peripheral European debt issue is concerned, it’s a lot more challenging to resolve because it involves politics as well as economics,” said Khiem Do, Hong Kong-based head of Asian multi-asset strategy at Baring Asset Management (Asia) Ltd., which oversees about $10 billion.

European Finance ministers said the role of International Monetary Fund as the contributor of a third of the bailout money for Greece, Ireland and Portugal won’t be hampered by the arrest of the IMF’s Managing Director Dominique Strauss-Kahn May 14 on sexual-assault charges in New York. Europe’s donor countries tied extra money for Greece to pledges that it deepen spending cuts and reap more revenue from asset sales.

Oil Slides

Concern over aid for Greece, coupled with speculation U.S. fuel demand may be slowing, sent oil falling for the first time in three days. It lost 2.3 percent to $96.37 a barrel on the New York Mercantile Exchange. OAO Gazprom, the world’s biggest natural gas exporter, slid for the fourth day in a row, losing 1.6 percent in Moscow.

Petroleo Brasileiro SA (PETR4), Brazil’s state-controlled oil company, overcame the drop in oil and advanced 1.8 percent after posting first-quarter profit of 10.99 billion reais ($6.72 billion), beating analysts’ estimates. Brazil’s Bovespa index declined 0.6 percent as most stocks fell on speculation policy makers will lift interest rates for longer than expected to curb inflation, offsetting an increase in first-quarter earnings. Mexico’s IPC index advanced 0.2 percent.

Copper for three-month delivery added 0.2 percent in New York. Grupo Mexico SAB, the country’s largest mining company, climbed 1.3 percent. The real strengthened the most among Latin American currencies tracked by Bloomberg, rising 0.1 percent.

South Korean Stocks

South Korean stocks were downgraded at Goldman Sachs amid concern inflation isn’t abating and the global economy is slowing. The brokerage also reduced its recommendation for Japanese stocks to “underweight,” citing “greater cautiousness on U.S. growth.”

Dongkuk Steel Mill Co., South Korea’s third-largest steelmaker, plunged 9.4 percent, the steepest decline since Jan. 15, 2009. The company was cut to “sell” from “neutral” at Goldman Sachs, which said its earnings growth may slow. Samsung Electronics Co. retreated 1.6 percent after a U.S. trade panel ruled Whirlpool Corp., the world’s largest appliance maker, is being harmed by low-cost refrigerators from Mexico and South Korea, paving the way for tariffs on those imports.

Money-Market Rates

In Shanghai, Industrial & Commercial Bank of China (601398) Ltd., the world’s biggest bank by market value, dropped 1.5 percent after money-market rates jumped the most in three months. China’s money-market rate rose on speculation a surge in banks’ reserve ratios to a record will lead to a cash squeeze in the financial system.

India’s Bombay Stock Exchange Sensitive Index, or Sensex, decreased 1 percent after the commerce ministry reported that the wholesale-price index rose 8.66 percent in April, exceeding the 8.5 percent median forecast in a Bloomberg survey.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries was little changed at 3.02 percentage points, according to JPMorgan Chase & Co.’s EMBI Global Index.

To contact the reporters on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net; Jason Webb in London at jwebb25@bloomberg.net.

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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