Emerging-market stocks fell the most in three months as the shrinking European economy and the region’s debt crisis spurred an exit from riskier assets.
The MSCI Emerging Markets Index (MXEF) dropped 2.3 percent, , the biggest one-day retreat since Nov. 23, to 1,041.20 at the close in New York.
Energy and materials companies led the declines, with Vale SA (VALE5), the world’s largest iron ore producer, dropping the most since October and Cemex SAB (CEMEXCPO), the biggest cement maker in the Americas, sliding 4.3 percent in Mexico. Brazil’s Bovespa stock index plunged the most in five months. OAO Mechel (MTLR), Russia’s largest producer of coal for steelmakers, helped drag the Micex Index (INDEXCF) down the most since Dec. 9.
Europe’s economy contracted 0.3 percent in the fourth quarter, the European Union’s statistics office said today. A report yesterday showed U.S. factory orders declined, while China announced the lowest growth target since 2004. A debt swap aimed at reducing the amount of privately held Greek debt, necessary to ensure a bailout, ends March 8.
“The economic data we had out this morning was pretty weak,” Neil Shearing, chief emerging-markets economist at Capital Economics Ltd. in London, said by phone. “We put less weight on the China story and more weight on weaker growth in the U.S. and more importantly any hopes of the euro crisis coming to an end being hopelessly misplaced.”
The Greek government has set a 75 percent participation rate as a threshold for proceeding with the debt swap. The goal is to reduce the amount of privately held Greek government bonds by 53.5 percent, helping avert an uncontrolled default that could roil markets and spur contagion to states such as Portugal.
Emerging-market stocks have advanced 14 percent this year, as the European Central Bank offered lenders loans for as long as three years and U.S. jobs data sparked speculation that buoyant consumer spending would boost the world’s largest economy. Developed-market stocks have gained 7 percent, and trade for 12.6 times estimated earnings, compared with 10.5 times for developing-nation shares.
Rio de Janeiro-based MMX said that Chief Financial Officer Guido Roberto Campos Germani resigned and will be replaced by Guilherme de Alencar Amado. Vale is setting aside $919.8 million in guarantees as part of a dispute over unpaid tax claims in Brazil, the company said yesterday.
Brazil’s economy grew 2.7 percent last year, the government said today, falling short of the median estimate of 2.8 percent in a Bloomberg survey of 32 economists.
Mexico’s IPC Index (MEXBOL) lost 1.7 percent, the most since Jan. 13.
The Micex Index (MICEX) slid 3.9 percent in Moscow, as all 30 stocks declined.
More than 200 people were detained by police after thousands of protesters rallied in central Moscow’s Pushkin Square yesterday, the day after Putin claimed victory in a presidential election that international observers said was unfair.
United Co. Rusal (RUALR), the world’s largest aluminum producer, plunged 6.4 percent, the most since September, and Mechel (MTLR) dropped 10 percent, the biggest decliner on the Micex. OAO GMK Norilsk Nickel (GMKN), the world’s biggest producer of the metal, slid 4.8 percent.
Chinese stocks extended yesterday’s drop as Premier Wen Jiabao cut the economic growth target for this year to 7.5 percent from the 8 percent level in place since 2005. Anhui Conch Cement Co. (914), China’s biggest maker of the building material, dropped 4.4 percent in Hong Kong.
The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong sank 3.1 percent, the most since Dec. 9. Benchmark indexes in South Korea and Taiwan dropped 0.8 percent. The BSE India Sensitive Index (SENSEX), or Sensex, slipped 1.1 percent, dropping for a second day.
The FTSE/JSE Africa All Share Index (JALSH) fell 1.9 percent in Johannesburg as metals prices slid on the outlook for global resource demand. The ISE National 100 Index (XU100) retreated 0.9 percent in Istanbul and the lira depreciated 1.1 percent against the dollar as inflation remained at twice the central bank’s target even after slowing to 10.4 percent in February.
Iceland’s krona and the Hong Kong dollar were the only emerging-market currencies among 25 tracked by Bloomberg to strengthen against the dollar today. South Africa’s rand weakened 1.4 percent, and the Brazilian real lost 1.1 percent versus the greenback.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries widened eight basis points, or 0.08 percentage point, to 357, according to JPMorgan Chase & Co.’s EMBI Global Index.