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Emerging Stocks Decline on Europe as Brazil’s Real Slumps

Emerging-market stocks dropped to a one-month low, led by Turkish equities, on concern that a slower expansion in the euro area will crimp global growth. Brazil’s real fell the most among the world’s major currencies.

The MSCI Emerging Markets Index slipped 1.1 percent to 1,016.30, the lowest since Oct. 10. Benchmark equity gauges from Turkey to India and Mexico slid at least 1.2 percent. The real sank 1.9 percent, leading losses among 31 major currencies tracked by Bloomberg, and Brazil’s swap rates rose to a two-year high, on bets the central bank will boost borrowing costs.

Stocks joined a global slump in equities after the European Union trimmed its forecast for euro-area growth next year and raised its unemployment estimate as the economy struggled to regain momentum after a record-long recession. European Central Bank President Mario Draghi speaks before a policy meeting this week. Service industries in the U.S. expanded in October at a faster pace than forecast, showing the biggest part of the economy was holding up as the federal government shut down.

“There’s a little bit of skepticism as to how bold the ECB might be on Thursday,” Brian Jacobsen, who helps oversee $236 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin, said by phone. “The ISM number coming in pretty decently perhaps got a few people concerned the Fed tapering might commence in December rather than March.”

All 10 groups in the MSCI Emerging Markets Index dropped today, led by consumer, commodity and financial shares. The broad measure trades at 10.6 times projected earnings, compared with the valuation of 14.3 for the MSCI World Index.

Emerging ETF

The iShares MSCI Emerging Markets Index exchange-traded fund retreated 2 percent to $41.88. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, rallied 8.8 percent to 23.83.

Brazil’s Ibovespa retreated from a one-week high as Gafisa SA (GFSA3) led homebuilders lower after central bank President Alexandre Tombini said policy makers must be “especially vigilant” on inflation. The real depreciated to the weakest level in almost two months. Mexico’s IPC index sank the most since Sept. 30.

Most Russian stocks declined as crude oil fell and pipemaker OAO TMK dropped 4.3 percent on concern it will be cut from a gauge tracked by equity investors. The world’s biggest pipemaker by output may be removed from MSCI Inc.’s Russia Index, VTB Capital said Oct. 31.

Turkey, Poland

The Borsa Istanbul National 100 Index retreated 2 percent, the most among major emerging-market gauges, as Turkiye Halk Bankasi AS (HALKB) led declines in lenders. Benchmark gauges in the Czech Republic and Poland dropped at least 1 percent.

South Africa’s rand weakened to a two-month low against the dollar because of concern that slowing growth in the euro region will weigh on exports as labor disputes in the mining industry dent investor confidence.

Indian (SENSEX) stocks fell for the first time in six days, led by technology and consumer companies, after benchmark indexes climbed to records in a holiday trading session on Nov. 3. Tata Consultancy Services Ltd. (TCS), the biggest software exporter, dragged a gauge of technology companies to the lowest level since Oct. 24. Cigarette maker ITC Ltd. (ITC) sank to a two-month low, pacing declines among consumer shares.

The Shanghai Composite Index advanced, erasing a loss of as much as 1.2 percent. Premier Li Keqiang was cited by the Xinhua News Agency as saying it’s very important to make farmers wealthy and reforms are needed for the development of modern agriculture. Heilongjiang Agriculture Co. jumped by the daily limit of 10 percent.

The premium investors demand to own emerging-market debt over U.S. Treasuries fell three basis points, or 0.03 percentage point, to 315 basis points, according to JPMorgan Chase & Co.

To contact the reporters on this story: Julia Leite in New York at jleite3@bloomberg.net; Lyubov Pronina in London at lpronina@bloomberg.net; Ian Sayson in Manila at isayson@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net

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