Emerging Stocks Decline After U.S. Data as Rand Tumbles

Emerging-market stocks declined to a three-week low after better-than-estimated U.S. data bolstered speculation the Federal Reserve will reduce stimulus. South Africa’s rand slumped to the lowest level since 2009.

The MSCI Emerging Markets Index fell 0.7 percent to 995.75. The Czech PX Index decreased 1.1 percent after a report showed the nation’s economy contracted for a seventh quarter. The Shanghai Composite Index rose 1.3 percent, led by companies linked to Shanghai’s free-trade zone, after the central bank said it plans to implement reform measures for the area within three months. The rand retreated for a third day amid the longest selloff of South African bonds in five years.

Stocks fell as data showed U.S. employers added more workers than forecast, while purchases of new homes surged by the most in three decades. Gains in manufacturing, technology and housing kept the economy expanding at a “modest to moderate” pace from early October through mid-November, the Federal Reserve said in its Beige Book business survey. The report gives policy makers clues to the state of the economy as they debate whether to start reducing monthly bond purchases.

“When we get better-than-expected U.S. economic data, that renews tapering fears,” Alec Young, a global equity strategist at S&P Capital IQ, said by phone from New York today. “Emerging markets are very sensitive to that.”

The gauge for stocks in developing nations has slid as much as 16 percent since May 22, when the U.S. central bank signaled its asset-buying program could be trimmed if the economy showed sustained improvement.

Emerging ETF

Consumer, industrial and energy companies led declines among the 10 groups in the gauge for developing-nation stocks. The iShares MSCI Emerging Markets Index exchange-traded fund declined 0.1 percent to $41.27. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, slipped 0.3 percent to 26.02.

Brazil’s Ibovespa (IBOV) dropped to the lowest level in three months as Anhanguera Educacional Participacoes SA (AEDU3) tumbled as Brazil’s antitrust regulator sought concessions for the education company’s acquisition by Kroton Educacional SA. (KROT3)

The PX index slumped in Prague as developer Orco Property Group SA plunged to the lowest level since October 2012. Russia’s Micex Index slid to a three-month low, led by OAO Gazprom. Poland’s WIG20 Index declined for a third day.

India, China

India’s S&P BSE Sensex (SENSEX) retreated for a second day amid speculation a rally in crude will stoke inflation in a country that buys about 80 percent of its oil from abroad. ITC Ltd. (ITC) slid 2 percent, sending a gauge of consumer goods companies to a two-week low. India’s rupee reversed earlier losses on speculation inflows will continue as monthlong local elections for five regions end today.

Chinese stocks rose to the highest level since Sept. 12 as Shanghai Waigaoqiao Free Trade Zone Development Co. jumped by the daily limit of 10 percent, while Shanghai-based China Eastern Airlines Co. climbed 5.9 percent. Cosco Shipping Co. surged 10 percent on speculation the government will provide more support to the industry.

South Africa’s rand dropped on concern that the nation will struggle to finance its current-account gap when Federal Reserve stimulus dries up. Foreign investors dumped South African bonds for a 10th straight day yesterday, the longest streak since October 2008, according to data compiled by Bloomberg from the Johannesburg Stock Exchange.

The premium investors demand to own emerging-market debt over U.S. Treasuries fell four basis points, or 0.04 percentage point, to 336 basis points, according to JPMorgan Chase & Co.

To contact the reporters on this story: Halia Pavliva in New York at hpavliva@bloomberg.net; Zahra Hankir in London at zhankir@bloomberg.net; Harry Suhartono in Jakarta at hsuhartono@bloomberg.net

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

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