Emerging-market stocks fell from a three-year high and the ruble slid with eastern European currencies as Ukraine called an emergency meeting to defend against what it deemed a Russian invasion.
The MSCI Emerging Markets Index slumped 0.6 percent to 1,086.98 in New York, ending a four-day gain. OAO Sberbank led the Micex Index (VTBMICX) to its steepest drop in three weeks. The Ibovespa fell for the first time in four days as Vale SA slid to a two-month low. The ruble weakened 1.5 percent versus the dollar, leading declines among its developing-nation peers, while shares in Ukraine plunged 6.2 percent.
The government in Kiev will reinstitute the military draft and is seeking U.S. support, a Ukrainian official said today. Ukraine said the fighting has spread to the shores of the Sea of Azov, effectively opening a new front. President Barack Obama blamed Russia for the escalation of fighting and said that the U.S. and its European allies are discussing additional steps to pressure the government in Moscow. Russia has repeatedly denied involvement in its neighbor’s unrest.
“Things have taken a turn for the worse on the ground in Ukraine and the markets are reacting to that,” Lars Christensen, the chief emerging-market analyst at Danske Bank A/S (DANSKE) in Copenhagen, said by phone. “We are likely moving to another round of sanctions.”
The emerging-markets gauge has risen 8.4 percent this year and trades at 11.3 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has gained 5 percent and is valued at a multiple of 15.
An index tracking developing-country currencies retreated 0.3 percent, the steepest drop in more than a week.
The Micex fell 1.7 percent, led by a 4.3 percent slide in Sberbank, the country’s biggest lender. The violence in Ukraine expanded a day after Russian President Vladimir Putin met his Ukrainian counterpart and hailed the talks as a step toward a political resolution.
Fighting in Ukraine’s easternmost regions, which the United Nations says has claimed more than 2,000 lives in the past five months, is expanding both in terms of numbers and area. Ukraine will reinstitute the draft this fall, Mykhailo Koval, the deputy head of Ukraine’s National Defense and Security Council, told reporters today.
Obama ruled out confronting Russia militarily over Ukraine, saying that sanctions already imposed by the U.S. and European Union are having an impact.
OAO Aeroflot, Russia’s largest airline, slid 3.5 percent after posting a first-half loss compared to a profit a year earlier. Equities in Ukraine sank the most since March 3.
The premium investors demand to own developing-country debt over U.S. Treasuries rose one basis point to 278, according to JPMorgan Chase & Co. indexes. Nine out of 10 industry groups in the developing-nation gauge dropped, led by energy and material companies.
Twenty of 24 emerging-market currencies tracked by Bloomberg retreated against the dollar, while the Polish zloty, Czech koruna and Hungarian forint weakened at least 0.5 percent versus the euro.
The Ibovespa dropped 1.1 percent, as a rally that sent the gauge to the highest since January 2013 was deemed excessive. The benchmark gauge had jumped 36 percent from this year’s low through yesterday. Vale slumped 4.4 percent, its sixth day of losses, as iron ore fell to the lowest in five years.
The BUX Index in Budapest and the WIG30 Index in Warsaw fell 2.1 percent and 1.9 percent respectively. OTP Bank Plc tumbled 2.7 percent after the lender said it expects a full-year loss due to the cost of refunds on loan contracts and the Ukraine conflict.
Turkey’s lira depreciated 0.2 percent against the dollar after yesterday advancing 0.5 percent, the highest level in two weeks. Policy makers led by central bank Governor Erdem Basci, under government pressure to cut borrowing costs to bolster the economy, yesterday kept rates unchanged at 8.25 percent, saying a drought and geopolitical risks affected the inflation outlook.
Dubai’s DFM General Index slipped 1.2 percent as Arabtec Holding Co. (ARTC) slumped for the first time in nine days after former Chief Executive Officer Hasan Ismaik turned down an offer from Aabar Investments PJSC to buy part of his stake in the company.
The Shanghai Composite Index (SHCOMP) slid 0.6 percent as the one-day repurchase rate on the Shanghai Stock Exchange jumped to 45 percent, the highest level since December 2007. The Shanghai Securities News reported this week that a total of 10 initial public offerings will freeze about 800 billion yuan ($130 billion).