Emerging-market stocks fell the most in a month on concern the Federal Reserve may refrain from more monetary stimulus and as lower demand for Spanish bonds revived worries Europe’s debt crisis will harm global growth.
The MSCI Emerging Markets Index (MXEF) fell 1.7 percent to 1,037.33 in New York, the steepest slide since March 6. Materials and energy companies led the drop. Vale SA (VALE5), the world’s largest iron ore producer, had its biggest two-day drop in a month, and Brazil’s Bovespa (IBOV) Index fell to the lowest level since Jan. 31. Coal producer OAO Mechel (MTLR) led declines on Russia’s Micex Index. Gold Fields Ltd. (GFI), South Africa’s second-largest gold producer, fell the most since November.
The Fed won’t impose more accommodative monetary policy unless economic expansion falters or inflation quickens to more than the 2 percent target, according to minutes from the March 13 meeting released yesterday. U.S. services industries, which account for almost 90 percent of the economy, grew at a slower pace in March, Institute for Supply Management data showed today. Demand for Spanish government bonds dropped at an auction and Prime Minister Mariano Rajoy said the country is “facing an economic situation of extreme difficulty.”
“The markets were starting to price in both a better economic outlook and policy easing, and you can’t have both,” Neil Shearing, chief emerging-markets economist at Capital Economics Ltd. in London, said by phone. “The fear amongst investors is that Spain could now be the next domino to fall in the euro crisis.”
The MSCI Emerging Markets Index has climbed 13 percent this year, beating a 9.2 percent advance in the MSCI World Index (MXWO) of developed nations. The gauge of developing-country shares is valued at 10.6 times estimated earnings, compared with the MSCI World’s multiple of 12.6.
The IShares MSCI Emerging Markets Index exchange-traded fund, the most-traded ETF to track developing-nation shares, fell 1.8 percent to $42.51. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM), a gauge of options prices on the fund and expectations of price swings, rose 4.2 percent to 26.59.
Brazil’s Bovespa lost 1.2 percent to the weakest level since Jan. 31, as Vale slid 1.8 percent. Mexico’s IPC Index (MEXBOL) slumped 1.3 percent, retreating from a record high. Industrias Penoles SAB (PE&OLES*), Mexico’s largest silver producer, led declines, slipping 4 percent.
The FTSE/JSE All Share Index dropped 2.3 percent, the most in six months, as AngloGold Ashanti Ltd. (ANG), Africa’s biggest gold producer, tumbled 4.2 percent and Gold Fields, the world’s fourth-largest gold mining company, dropped 5 percent.
Markets in Hong Kong, mainland China and Taiwan are shut for holidays. South Korea’s Kospi Index (HSCEI) slid 1.5 percent, the most since Dec. 19. Indonesia’s Jakarta Composite Index (JCI) fell 1.9 percent, its steepest loss since Nov. 21.
Most emerging-market currencies weakened against the dollar, as the Turkish lira slipped 0.7 percent, while South Africa’s rand lost 1 percent.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries increased seven basis points, or 0.07 percentage point, to 340 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.
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