Emerging-Markets Stocks Decline to Three-Week Low on Signs of China Slump

Emerging-market stocks fell to a three-week low as data showed China’s manufacturing may contract for a second month and crude prices fell.

The MSCI Emerging Markets Index (MXEF) dropped for a sixth day, sliding 0.8 percent to 896.68 at the close in New York, the lowest since Nov. 25. The Hang Seng China Enterprises Index (HSCEI) of Chinese stocks listed in Hong Kong lost 2.1 percent. Brazil’s benchmark gauge fell 0.6 percent. The ISE National 100 Index (XU100) rose 1.1 percent in Istanbul and the Micex Index advanced 1.5 percent in Moscow.

The MSCI gauge pared earlier losses of 1.5 percent as U.S. jobless claims and New York- and Philadelphia-area manufacturing indicators signaled the world’s largest economy is strengthening. HSBC Holdings Plc and Markit Economics’s manufacturing index for China showed a contraction for December, while another report showed foreign direct investment fell last month, the first decline since 2009. Crude oil retreated to settle at $93.87 a barrel in New York.

“China faces some headwinds from weaker exports,” Flemming Nielsen, an analyst at Danske Bank A/S in Copenhagen, wrote in an e-mailed note to clients. The bank said the data led it to cut a forecast for Chinese economic growth in 2012 to 8.5 percent from 8.9 percent. “However, at this stage, it appears that the headwinds China faces are far less severe than in the wake of the financial meltdown in late 2008.”

The MSCI Emerging Markets Index retreated over the past week as data from China to Brazil fueled concerns Europe’s debt crisis is weighing on economic growth in emerging markets. Developing market stocks have fallen 22 percent this year, while developed markets (MXWO) have lost 11 percent.

Brazil Rebounds

Brazilian stocks fell for a second day as oil companies followed crude prices lower. Oil driller Petroleo Brasileiro SA lost 1.4 percent and OGX Petroleo & Gas Participacoes SA declined 2.4 percent.

U.S. jobless claims dropped by 19,000 to 366,000 last week, the fewest since May 2008 and below the median forecast of 47 economists surveyed by Bloomberg. Manufacturing in the New York region expanded more than forecast to the highest level in seven months, according to the Federal Reserve Bank of New York’s general economic index. The Federal Reserve Bank of Philadelphia’s general economic index increased to 10.3, indicating expansion in the area.

The BUX Index (BUX) jumped 1.5 percent in Budapest and the forint strengthened 1 percent versus the euro as the government signed a deal with the country’s banks on measures to help foreign- currency mortgage holders.

Shanghai Stocks

The Shanghai Composite Index (SHCOMP) fell for a sixth day.

Foreign direct investment in China slid 9.8 percent last month, the Ministry of Commerce said in a statement in Beijing. A preliminary reading of 49 in December for the purchasing managers’ index compared with a final 47.7 in November. A number below 50 points to a contraction.

China will ensure the overall consumer prices are “basically stable” while guaranteeing steady economic growth next year, Xinhua News Agency said. The report came after the conclusion of the government’s annual central economic work conference, which sets the tone for economic policies for the following year.

The Brazilian real appreciated 1.1 percent while the Mexican peso lost 0.2 percent versus the dollar.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell 2 basis points, or 0.02 percentage point, to 422, according to JPMorgan Chase & Co. (JPM)’s EMBI Global Index.

To contact the reporters on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net; Zachary Tracer in New York at ztracer1@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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