Emerging-market stocks declined, extending a weekly slump, and currencies fell as stronger-than-forecast U.S. jobs data boosted speculation the Federal Reserve will pare back monetary stimulus in the world’s biggest economy.
The MSCI Emerging Markets Index slid 0.5 percent to 917.58, sending its weekly retreat to 2.4 percent. The Borsa Istanbul Stock Exchange National 100 Index (XU100) led losses among developing nations, while the lira weakened to a record low. Twenty two out of the 24 currencies tracked by Bloomberg fell. Gold producers paced a slump in South Africa’s benchmark stock index as the metal sank amid a U.S. dollar rally. The premium investors demand to own emerging-market debt over U.S. Treasuries tumbled 15 basis points, according to JPMorgan Chase & Co.
Stocks erased gains after government data showed that U.S. employment increased more than forecast in June, wages picked up and the U.S. jobless rate held close to a four-year low as the world’s largest economy weathered the effect of higher taxes and federal budget cuts. Today’s report gives Fed Chairman Ben S. Bernanke more reason to start trimming bond purchases intended to spur the economy and lower unemployment.
Emerging markets are “looking at it more from the standpoint of implications for Fed policy, thinking that this may lead to the Fed tapering bond purchases more quickly,” Peter Jankovskis, who helps oversee $3 billion as co-chief investment officer of Lisle, Illinois-based Oakbrook Investments LLC, said by phone. “Anything that removes support from the economy is going to be negative for the world economy, which would certainly impact emerging markets.”
All 10 groups in the MSCI Emerging Markets Index fell, led by commodity and phone shares. The broad measure has slumped 13 percent this year, compared with an 8.3 percent gain in the MSCI World Index. The developing-nation gauge trades at 9.6 times projected earnings, lower than the MSCI World’s valuation of 13.3, according to data compiled by Bloomberg.
The iShares MSCI Emerging Markets Index exchange-traded fund slid 0.6 percent to $37.34. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, slipped 3.9 percent to 29.56.
The Ibovespa (IBOV) fell 1.2 percent as steelmaker Usinas Siderurgicas de Minas Gerais SA and iron-ore producer Vale SA dropped as metals declined. The real depreciated even after Brazil’s central bank sold $1.9 billion worth of currency swap contracts today to stem the currency’s decline in the 12th day of intervention in the past five weeks.
Turkey’s benchmark gauge slumped to the lowest level since June 25, while the lira retreated 1.3 percent. Poland’s WIG20 Index dropped 1.5 percent and Hungarian shares gained. The FTSE/JSE Africa All Shares Index slumped 2.1 percent in Johannesburg as DRDGOLD Ltd. and AngloGold Ashanti Ltd. plunged.
China’s benchmark stock index advanced, capping its first weekly gain since May, as rallies in property firms and material producers overshadowed losses in energy shares and drugmakers. China Vanke Co. climbed 4.1 percent after the developer’s sales increased last month.
India’s S&P BSE Sensex (SENSEX) extended this week’s advance to 0.5 percent, a second straight week of gains. Hindustan Unilever, India’s biggest household products maker, rose to a record. Reliance Industries Ltd., owner of the world’s largest refining complex, added 2.2 percent, the biggest boost to the Sensex.
The extra yield for emerging-market debt over U.S. Treasuries tumbled to 319 basis points, according to JPMorgan’s EMBI Global Diversified Index.