Emerging-market stocks fell for a second day, bond yields rose and India’s rupee touched a record low on speculation the Federal Reserve will reduce economic stimulus. The lira rebounded as Turkey sold dollars.
The MSCI Emerging Markets Index dropped 1.3 percent to 905.96. Brazil’s Ibovespa slid as Citigroup Inc. lowered its recommendation for the nation’s stocks, while iron-ore producer Vale SA slumped. India’s rupee fell below the previous record on June 26, while the lira advanced after the central bank sold the most foreign exchange in 12 years. The premium investors demand to own emerging-market debt over U.S. Treasuries rose 0.08 percentage point, according to JPMorgan Chase & Co.
Stocks in Asia’s developing nations led losses, with the Jakarta Composite Index down 3.7 percent, as stronger-than-forecast U.S. jobs data on July 5 boosted speculation the Fed will trim monetary stimulus in the world’s biggest economy. Political turmoil also contributed to declines after dozens were killed in clashes between the military and supporters of deposed Egyptian President Mohamed Mursi.
“Today’s action is still driven by the quantitative easing tapering fears,” Sean Lynch, the Omaha, Nebraska-based global investment strategist for Wells Fargo Private Bank, said by phone, referring to the Fed’s stimulus program. His firm oversees about $170 billion. “We saw geopolitical risk come back into play. This is a factor to consider when investing.”
Technology and financial shares led the declines among 10 industries in the MSCI Emerging Markets Index. The broad measure has slumped 14 percent this year, compared with an 8.9 percent gain in the MSCI World Index. The developing-nation gauge trades at 9.5 times projected earnings, lower than the MSCI World’s valuation of 13.4.
The iShares MSCI Emerging Markets Index exchange-traded fund rose 0.1 percent to $37.39. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, slipped 2.6 percent to 28.79.
Brazil’s Ibovespa lost 0.3 percent, extending this year’s tumble to 26 percent, while the real weakened. Citigroup cited a “discouraging mix” of a depreciating currency, slower growth and political unrest in changing its call on Brazilian equities. Vale contributed the most to the benchmark’s decline as prices for the steel-making ingredient fell for the first time in eight days.
Mexico’s peso climbed the most in three weeks on speculation demand for the nation’s assets will weather concern that the Fed will scale back stimulus.
Russian equities, the cheapest among emerging markets, advanced after Citigroup Inc. raised the nation’s stocks to overweight, citing low valuations. OAO Raspadskaya, a coal producer, climbed 4.9 percent after resuming work at its flagship mine after a two-month halt.
The Borsa Istanbul Stock Exchange National 100 Index fell to the lowest level since June 25 and the lira added 1.1 percent. Poland’s WIG20 Index dropped 1.3 percent, while stock gauges in Hungary and the Czech Republic gained. The FTSE/JSE Africa All Shares (JALSH) Index rose 1.6 percent in Johannesburg.
India’s rupee declined 0.6 percent to 60.6150 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It dropped as low as 61.2125, passing the previous record of 60.7650 on June 26.
Indonesia’s stocks, bonds and currency fell on speculation the central bank will raise interest rates. PT Bank Mandiri (BMRI), the nation’s largest lender by assets, slid 7.4 percent, the biggest drag on the Jakarta index.
Chinese stocks dropped the most in two weeks as indexes tracking energy, materials and industrial companies sank to the lowest levels since November 2008. China Shenhua Energy Co., the nation’s biggest coal producer, slipped 3.6 percent. The Shanghai Composite Index fell 2.4 percent.
Egypt’s EGX 30 Index decreased 3.6 percent, the biggest retreat since June 12. Commercial International Bank SAE led the drop, losing 3.7 percent on volume of 1.7 times the three-month daily average.