Emerging Stocks Drop on Euro, China; Shanghai Falls Fourth Day

Emerging-market stocks fell on concern ratings cuts for some European nations will worsen the region’s debt crisis and before the release of economic data that may show a decline in China’s growth rate.

The MSCI Emerging Markets Index (MXEF) declined 0.5 percent to 948.38 as of 12:41 p.m. in London. South Korea’s Kospi Index (KOSPI) slid 0.9 percent. The Shanghai Composite Index (SHCOMP) dropped 1.7 percent, its fourth consecutive decline, before tomorrow’s release of data that may show China’s economy grew at the slowest pace in 10 quarters. The ISE National 100 Index rose 1.1 percent in Istanbul.

Standard & Poor’s stripped France of its top credit rating and cut eight other European nations on concern the region hasn’t done enough to contain its debt crisis. China’s economy may have grown 8.7 percent in the last quarter of 2011, the slowest pace since the second quarter of 2009, according to the median of 26 estimates in a Bloomberg survey.

“Risk sentiment took a dive after Standard and Poors’ ratings downgraded various Eurozone sovereigns on Friday,” analysts at BNP Paribas SA including Bartosz Pawlowski in London wrote in an e-mailed note to clients, “Meanwhile, Greek PSI negotiations remain in deadlock.”

The Greek government and its creditors return to the negotiating table this week to revive stalled talks on a debt swap. The government intends to announce the details of the private-sector involvement, or PSI, between Feb. 6 and Feb. 10, according to an e-mailed transcript of a speech sent by the ministry.

Russian Outlook

The ruble strengthened 0.3 percent after Fitch Ratings revised Russia’s ratings outlook to stable from positive while affirming the country’s credit score at BBB, according to a statement released today. The agency said it based its decision on increased “political uncertainty” and a deteriorating outlook for the world economy.

The Korean won weakened 0.6 percent against the dollar. The Indonesian rupiah and the Turkish lira strengthened 0.5 percent.

Turkiye Garanti Bankasi AS (GARAN), Turkey’s biggest listed bank by market value, gained 1.4 percent in Istanbul.

The FTSE/JSE Africa All Share Index (JALSH) advanced 0.4 percent in Johannesburg as gold and copper prices rose. The BUX Index (BUX) fell 0.5 percent in Budapest and the Sensitive Index, or Sensex (SENSEX), rose 0.2 percent in Mumbai.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries was unchanged at 440 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

The Markit iTraxx SovX CEEMEA Index of eastern European, Middle East and Africa credit-default swaps rose two basis points to 352, according to data provider CMA.

-- Editors: Peter Branton, Alex Nicholson

To contact the reporter on this story: Ian Sayson in Manila at isayson@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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