Emerging-market stocks fell for a second day after the U.S. reported higher unemployment claims and near an all-time low consumer confidence, and selling in German futures sparked a rout in global equities.
The MSCI Emerging Markets Index retreated 0.5 percent to 973.05 as of 5:35 p.m. in New York. Brazil’s Bovespa index and the Mexican IPC Index dropped the most in five days. Benchmark gauges in Russia and Hungary both sank 1.3 percent. Thailand’s SET Index dropped 2.1 percent after CLSA Asia-Pacific Markets lowered its forecast for the measure.
Claims for U.S. unemployment benefits unexpectedly rose last week, the Labor Department figures showed today. Consumer confidence stabilized last week at a level that’s within striking distance of an all-time low as Americans remained pessimistic about the economy, the Bloomberg Consumer Comfort Index indicated. Traders sold German equity futures to hedge equities before France, Italy and Spain extended curbs on short selling, which sent the DAX Index (DAX) down 4 percent in 15 minutes.
“People are pretty much in a risk-off mode and really don’t have any motivation to buy riskier, emerging-market assets,” said Ed Kuczma, who helps manage $30 billion at Van Eck Associates in New York. “We’re seeing increased volatility across the board with the latest global macro considerations.”
Investors are awaiting a speech by Federal Reserve Chairman Ben S. Bernanke in Jackson Hole, Wyoming, tomorrow for any indications of whether the Fed will embark on further stimulus to bolster the economy. At last year’s meeting, he signaled a second round of asset purchases that boosted stock markets.
The MSCI emerging-market index has retreated 19 percent from this year’s high on May 2 after worse-than-estimated U.S. economic data, the unprecedented downgrade of America’s top debt rating and signs that Europe’s most-indebted countries may struggle to repay obligations shook investor confidence. The gauge is valued at 8.9 times analysts’ estimates for 12-month earnings, compared with 11.3 times at the start of the year, according to data compiled by Bloomberg.
Steel Maker, Banks
Common shares of Usinas Siderurgicas de Minas Gerais SA, Brazil’s second-largest steelmaker, tumbled 5.8 percent, after Chief Executive Officer Wilson Brumer told investors in Sao Paulo that he sees little change in steel prices in the third quarter compared with the second quarter. In Mexico, Grupo Elektra SA, the retail and banking company controlled by billionaire Ricardo Salinas, tumbled 7.6 percent.
Turkiye Garanti Bankasi AS (GARAN), Turkey’s biggest listed bank by market value, and Turkiye Is Bankasi (ISCTR) AS, the nation’s biggest listed bank by assets both fell after their price estimates were cut by Morgan Stanley on speculation slowing economies and funding pressures will curb earnings.
The Shanghai Composite Index jumped 2.9 percent, the most in 10 months, after Bank of China Ltd. (3988) reported record profit.
Bank of China increased 2.4 percent in Shanghai after saying first-half profit jumped 28 percent to a record while bad loans fell. Industrial & Commercial Bank of China (1398) Ltd., the world’s largest lender by market value, and Agricultural Bank of China Ltd. (601988) posted earnings that topped analysts’ estimates after local markets closed.
OAO Gazprom, Russia’s natural gas export monopoly, declined 1.5 percent while OAO Novatek, the country’s second-largest natural-gas producer, lost 2.5 percent.
“Stocks are looking reasonably valued,” Ajay Kapur, head of Asian equity strategy at Deutsche Bank AG, said in a Bloomberg Television interview in Hong Kong. “No one is really expecting a silver bullet, but what we think he might say is elaborate on the FOMC’s decision to keep rates low till 2013,” Kapur said, referring to Bernanke’s speech tomorrow.
Fed policy makers, who said Aug. 9 they’ll use additional tools “as appropriate,” probably don’t expect a recession or rapid disinflation, making a signal of bond buying premature, said Roberto Perli, managing director at International Strategy & Investment Group. Instead, Bernanke will probably detail options for further stimulus and clarify how much the Fed’s reduction in its outlook this month stems from long-term obstacles to growth, said Keith Hembre, a former Fed researcher.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose 3 basis points, or 0.03 percentage point, to 3.66, according to JPMorgan Chase & Co.’s EMBI Global Index. The Markit iTraxx SOVX CEEMEA Index of credit-default swaps for emerging Europe, the Middle East and Africa dropped 3 basis points, or 0.03 percentage point, to 268, according to CMA in London.
Emerging-market currencies were mixed. Turkey’s lira gained 1.7 percent against the dollar, and the South Africa rand advanced 0.4 percent. The South Korean won and Indonesian rupiah weakened 0.5 percent against the greenback.
Samsung Electronics Co., the world’s second-largest maker of mobile phones, gained 2.4 percent and LG Electronics Inc. (066570), the third-largest mobile-phone maker, climbed 1.3 percent.
Apple Inc. (AAPL) Chief Executive Officer Steve Jobs resigned yesterday and will become chairman of the world’s most valuable technology company. Jobs was on medical leave since Jan. 17 after combating a rare form of cancer since 2003 and surviving a liver transplant in 2009.
“Given that the key driver of Apple has been Jobs’s creativity and ideas, Korean companies may find opportunities in his absence in the longer term,” said Seo Won Seok, an analyst at NH Investment & Securities Co. in Seoul.
TPK Holding Co., a manufacturer of touch screens, retreated 1.8 percent in Taipei, pacing a decline among Taiwan-based companies that supply parts to Apple. Hon Hai Precision Industry Co., which assembles iPhones and iPads, slumped 4.6 percent.
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