Emerging-market stocks snapped a five-day rally, led by losses in Brazilian shares, and currencies fell after Nomura Holdings Inc. said Latin America’s largest economy may enter a recession. Bond yields declined for a sixth day.
The MSCI Emerging Markets Index slumped 1 percent to 932.12, following the longest advance since March. Brazil’s Ibovespa stock measure tumbled to the lowest level since April 2009 as companies controlled by billionaire Eike Batista plunged. Twenty out of the 24 developing-nation currencies tracked by Bloomberg weakened as the real retreated for the third time in four days. The premium investors demand to own emerging-market debt over U.S. Treasuries declined four basis points, according to JPMorgan Chase & Co.
Brazil’s industrial production fell more than economists forecast, as the government’s fight against inflation complicates its strategy to revive growth. The nation may enter a recession by the end of this year, Nomura Holdings’ analysts wrote in a note, citing the negative impact that tighter monetary policy in the U.S. might have on Brazil’s economy as it curbs capital inflows. Bank of America Corp. cut today its forecast for China’s second-quarter economic growth.
“The bloom is coming off the rose with respect to prospects for emerging markets in the near term,” Lawrence Creatura, a Rochester, New York-based fund manager at Federated Investors Inc., which oversees about $380 billion, said by phone. “There is certainly suspicion growth rates will continue to decelerate from here.”
Nine out of 10 groups in the MSCI Emerging Markets Index fell, led by financial and consumer discretionary shares. The broad measure has slumped 12 percent this year, compared with an 8 percent gain in the MSCI World Index. The developing-nation gauge trades at 9.7 times projected 12-month earnings, lower than the MSCI World’s valuation of 13.2, according to data compiled by Bloomberg.
The iShares MSCI Emerging Markets Index exchange-traded fund slid 1.8 percent to $37.93. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, climbed 18 percent to 30.18.
Brazil’s Ibovespa (IBOV) slid 4.2 percent, the biggest decline since September 2011, while the real fell to 2.2547 per dollar. OGX Petroleo & Gas Participacoes SA, the oil company controlled by billionaire Batista, extended a four-day plunge to 52 percent after Morgan Stanley cut the stock to the equivalent of sell. Mining company MMX Mineracao & Metalicos SA and port developer LLX Logistica SA sank at least 11 percent.
The Micex Index gained 0.1 percent in Moscow, reversing earlier losses, as OAO Lukoil (LUKOY) joined crude higher. West Texas Intermediate oil climbed near $100 a barrel. Benchmark gauges in Hungary and Turkey dropped more than 0.3 percent, while Poland’s WIG20 Index surged 2.1 percent.
Chinese stocks rose for a third day, the longest winning streak in five weeks. PetroChina Co. (857), the country’s biggest natural gas supplier, capped its biggest gain in four years in Hong Kong trading after Beijing announced it will raise prices for non-residential users. BYD Co., the Chinese electric carmaker partly owned by Warren Buffett’s Berkshire Hathaway Inc., rose the most in two months in Hong Kong as Shenzhen City said it is considering incentives to promote electric vehicles.
India’s S&P BSE Sensex (SENSEX) retreated 0.6 percent, while the measure’s 30-day volatility climbed to the highest in more than a year. Reliance Industries Ltd., owner of the world’s largest refining complex, fell for the first time in four days.
The won halted its longest run of gains in two months on speculation importers bought dollars after the South Korean currency rallied 2.6 percent over the previous five days. Government bonds advanced. SK Hynix Inc. (000660) fell the most in 13 months in Seoul after CLSA Asia-Pacific Markets advised selling the stock on expectations memory-chip prices will drop.
Egypt’s stocks surged the most in a year after the military gave President Mohamed Mursi 48 hours to find a solution to the political impasse. Bond yields declined.
The extra yield for emerging-market debt over U.S. Treasuries declined 0.04 percentage point to 332 basis points, according to JPMorgan’s EMBI Global Diversified Index.