Emerging Stocks Retreat as Ibovespa Leads World Declines

Emerging-market stocks slumped to a four-month low as concern China’s economic growth will falter sank commodity producers from Vale SA (VALE5) to Minmetals Development Co. Brazil’s Ibovespa (IBOV) led losses among global equity indexes.

The MSCI Emerging Markets Index fell 1 percent to 963.11. The Shanghai Composite Index (SHCOMP) declined to a five-month low as Great Wall Motor Co. (2333) drove a slide in automakers, while Minmetals retreated 6.3 percent. The Ibovespa dropped the most among 94 stock gauges tracked by Bloomberg as Vale, the world’s biggest iron-ore producer, sank 3.7 percent. South Africa’s rand slumped to the lowest level since October 2008.

All 10 groups in the gauge for developing-nation stocks retreated, led by consumer and commodity companies. China’s producer prices, a measure of the cost of goods as they leave the factory, extended the longest slide since the 1990s, adding to evidence that the world’s second-largest economy weakened last month. A report today also showed that applications for U.S. unemployment benefits fell to the lowest in a month, bolstering bets the Federal Reserve will keep cutting stimulus.

“China is slowing down; what they don’t want is a hard landing,” Quincy Krosby, a market strategist at Prudential Financial Inc. in Newark, New Jersey, said by phone. Her firm oversees more than $1 trillion. “There’s also an adjustment process as the Fed begins to taper. As the data begin to gain more traction than initially expected, you’d have the Treasury market making adjustments, and that has ramifications in the emerging markets.”

Emerging ETF

The iShares MSCI Emerging Markets Index exchange-traded fund fell 0.5 percent to $39.57. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, retreated 0.6 percent to 23.45.

Brazil’s Ibovespa sank to the lowest level since August as commodity exporters including Vale tumbled on signs growth is slowing in China, Brazil’s biggest trading partner. Embraer SA (EMBR3) fell as Banco Santander SA reduced its recommendation on the plane builder to the equivalent of sell. Retailer Cia. Hering (HGTX3) declined as traders raised bets on higher borrowing costs.

Russian stocks gained for the first time in three days as OAO Gazprom advanced amid speculation it will sign a supply contract with China. The Borsa Istanbul 100 Index extended a two-day drop to 3.2 percent, while Poland’s WIG30 index slid to a four-month low. Slovakia raised 1.5 billion euros ($2 billion) in 15-year bonds to take advantage of lower yields before the Fed makes more cuts to monetary stimulus.

Great Wall

The Shanghai Composite Index fell as Great Wall Motor, the biggest Chinese maker of sport-utility vehicles, lost more than 3 percent in Hong Kong and Shanghai after forecasting slowing sales growth. Stocks also dropped as traders speculated the resumption of new share sales will divert funds from existing equities. The yuan slid the most in more than two months.

Most Indian (SENSEX) stocks declined before the start the earnings season tomorrow. Lenders of gold-backed credit rallied after the central bank eased rules. Engineering company Larsen & Toubro Ltd. (LT) was the fell the most on the benchmark S&P BSE Sensex. Muthoot Finance Ltd. and Manappuram Finance Ltd., the nation’s largest gold-loan lenders, surged by the limit 20 percent. The rupee halted two days of gains.

South Africa’s rand decline brought its depreciation this year to 2.8 percent, the most out of 24 emerging-market currencies monitored by Bloomberg.

Egypt’s EGX 30 Index jumped to the highest level since January 2011. EFG-Hermes Holding SAE shares surged after trading resumed following the cancellation of yesterday’s transactions of the nation’s biggest listed investment bank for suspected insider trading.

The premium investors demand to own emerging-market debt over U.S. Treasuries rose two basis points, or 0.02 percentage point, to 311 basis points, according to JPMorgan Chase & Co.

To contact the reporters on this story: Julia Leite in New York at jleite3@bloomberg.net; Zahra Hankir in London at zhankir@bloomberg.net; Phani Varahabhotla in Hong Kong at pvarahabhotl@bloomberg.net

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

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