Emerging stocks fell to a one-month low, while Turkish bond yields surged the most since 2008 and Brazil’s real tumbled, as speculation the Federal Reserve will pare stimulus intensified concern about global growth.
Turkiye Garanti Bankasi AS (GARAN) dropped 3.9 percent in Istanbul, while OAO Sberbank, Russia’s largest lender, slumped to the lowest in a month. Brazil’s real weakened to the lowest level this year, while the Ibovespa (IBOV) had the biggest drop in dollar terms among major equity indexes led by homebuilders. Yields on Turkey’s two-year benchmark notes climbed to 5.52 percent at the close in Istanbul, the highest level in more than a month. Mexican bonds fell a ninth day.
The MSCI Emerging Markets Index lost 1 percent to 1,020.42, the lowest since April 24. The U.S. sold five-year notes after a two-year auction drew the fewest bids since 2011. Yesterday was the first offering since Fed Chairman Ben S. Bernanke said last week the central bank could reduce the pace of purchases. The International Monetary Fund cut China’s growth forecast today.
The Fed scaling back “certainly is a story that’s bubbling up from time to time,” Peter Jankovskis, who helps oversee $3 billion as co-chief investment officer of Lisle, Illinois-based Oakbrook Investments LLC, said by phone. “The IMF downgraded their forecast for China, and that had a ripple effect across emerging markets.”
Stocks in developing nations have fallen 1.8 percent in May, set for the third drop in four months. Commodity and utility shares have led the losses among the 10 industries in the MSCI Emerging Markets Index, slumping at least 3.2 percent. The broad gauge extended this year’s decline to 3.3 percent, compared with an 11 percent jump in the MSCI World Index.
The iShares MSCI Emerging Markets Index exchange-traded fund retreated 1.3 percent to $41.96. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, surged 8 percent to 21.78, the highest since April 18.
Brazil’s Ibovespa had the biggest decline since April 15, slumping 2.5 percent. OGX Petroleo (OGXP3) & Gas Participacoes SA, the oil producer controlled by the the billionaire Eike Batista, dropped the most on the stock benchmark as crude oil slid.
The real weakened 1.7 percent to 2.1106 as Finance Minister Guido Mantega said a declining currency isn’t a concern and the government won’t use the exchange rate to curb inflation.
Russian shares sank to a month-low as OAO Russian Grids fell before its removal from a benchmark gauge. Sberbank retreated 3.9 percent after saying first-quarter net income fell about 4 percent, beating analyst estimates on increased fees and growth in lending.
The Borsa Istanbul Stock Exchange National 100 Index slumping 3.1 percent, the lowest level in a month, as Turkiye Garanti Bankasi slid a third day.
The Hang Seng (2828) China Enterprises Index of mainland companies listed in Hong Kong slumped 1.6 percent, while the Shanghai Composite Index rose 0.1 percent. Zoomlion Heavy Industry Science & Technology Co. plunged in Hong Kong after denying allegations of falsified sales. India’s S&P BSE Sensex dropped for the first time in four days.
Philippine stocks advanced, driving the benchmark index to its biggest gain in more than three weeks, after Finance Secretary Cesar Purisima said the government will ensure economic growth stays high.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose seven basis points, or 0.07 percentage point, to 288 basis points, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index.