Emerging-Market Stocks Drop From Two-Week High on China, Spain

Emerging-market stocks dropped from a two-week high after investment banks lowered their estimate for China’s economic growth and Spain’s downgrade to one level above junk spurred concern Europe’s debt crisis is worsening.

The MSCI Emerging Markets Index (MXEF) slid 0.6 percent to 913.54 in New York after closing yesterday at its highest level since May 29, as PT Bumi Resources slumped the most since 2009. The Hang Seng China Enterprises Index (HSCEI) fell 1.4 percent, its biggest loss in 10 days, while Petroleo Brasileiro S.A. tumbled to the lowest since 2005 in Sao Paulo, pushing the Bovespa down.

Spain’s credit rating was cut three steps to Baa3 by Moody’s Investors Service yesterday. The yield on the country’s 10-year bonds jumped to a euro-era record 6.99 percent. A party opposed to Greece’s financial aid package has been tussling for the lead ahead of elections on June 17. Credit Suisse lowered China’s growth forecast for 2012 to 7.7 percent from 8 percent and Deutsche Bank AG trimmed its estimate to 7.9 percent from 8.2 percent on concern the debt crisis in Europe, China’s largest export market, will worsen.

“We remain very cautious on emerging market assets,” Pablo Goldberg, head of emerging market research at HSBC Bank USA, wrote in an e-mailed report today. “Without decisive action in the euro zone, market dynamics seems likely to worsen.‘‘

Italy sold 4.5 billion euros ($5.6 billion) of debt, with the three-year benchmark bond priced to yield 5.3 percent, from the 3.91 percent at the last auction on May 14 and the highest paid since December.

Petrobras, Hering

The MSCI Emerging Markets gauge has retreated 0.3 percent in 2012 and trades at a multiple of 9.9 times estimated earnings, compared with 11.9 for the index of developed nations, which has added 1.1 percent this year.

Petroleo Brasileiro, Brazil’s state-controlled oil company, fell 3.9 percent in Sao Paulo, hitting the lowest level since Nov. 30, 2005. The company reduced its production guidance ‘‘massively’’ in an investment program announced today, Banco BTG Pactual SA analyst Gustavo Gatass wrote in a note distributed by e-mail.

Cia Hering, a retailer, dropped 4.9 percent to lead declines for the Bovespa, which fell 0.5 percent to snap a two- day advance.

Indian Inflation

The BSE India Sensitive Index (SENSEX), or Sensex, fell 1.2 percent after data showed inflation quickened faster than estimated in May. The Hang Seng China Enterprises Index had its biggest loss since June 4, as Credit Suisse Group AG said the country faces years of ‘‘weak’’ growth.

Air China Ltd. (753), the world’s largest carrier by market value, slid 5.5 percent in Hong Kong to its lowest level since November 2009. The Shanghai Composite Index fell 1 percent, the most in 10 days.

The FTSE/JSE Africa All Share Index (JALSH) slid 0.6 percent in Johannesburg, as BHP Billiton Ltd. (BIL), the world’s biggest mining company, tumbled 1.1 percent.

Indonesia’s Jakarta Composite Index (JCI) slid 1.8 percent, the most in Asia. Bumi Resources, Asia’s largest exporter of power- station coal, fell 8.8 percent on concern a decline in coal prices will erode the company’s earnings. The Philippine Stock Exchange Index (PCOMP) slipped 1.7 percent.

The rupee weakened 0.2 percent against the dollar. India’s benchmark wholesale-price index climbed 7.55 percent, after rising 7.23 percent in April, the government said today. The median of 37 estimates in a Bloomberg News survey was for a 7.5 percent gain.

Kospi Gains

The Kospi Index (KOSPI) advanced 0.7 percent in Seoul. South Korea’s National Pension Service plans to spend 6.6 trillion won ($5.7 billion) buying more of the nation’s stocks next year.

The country’s biggest investor will increase the weighting of domestic stocks in its holdings to 20 percent of assets in 2013, the Ministry of Health and Welfare, which oversees the fund, said today.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell eight basis points, or 0.08 percentage point, to 385, according to JPMorgan Chase & Co.’s EMBI Global Index.

To contact the reporters on this story: Christine Harvey in New York at charvey32@bloomberg.net; Jason Webb in London at jwebb25@bloomberg.net

To contact the editors responsible for this story: Gavin Serkin at gserkin@bloomberg.net; Tal Barak Harif at tbarak@bloomberg.net

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