Emerging stocks fell, with the benchmark index extending its weekly loss to the biggest in a month, after U.S. President Barack Obama’s $447 billion jobs plan failed to ease concern that the global economy is slowing, while eastern European shares tumbled as currencies weakened.
The MSCI Emerging Markets Index declined 2.1 percent to 992.31 as of 5:47 p.m. in New York. The 2.9 percent loss this week was the biggest in four. Hungary’s BUX Index tumbled 6.2 percent as the government may force lenders to absorb losses on foreign-currency loans by fixing the exchange rate with the Swiss franc below prevailing rates. Brazil’s Bovespa dropped 3.2 percent while Mexico’s benchmark slid 2.6 percent. Poland’s WIG20 Index sank 5 percent.
Obama called on Congress yesterday to pass his job-creation package after employment growth stalled last month and European Central Bank President Jean-Claude Trichet said “downside risks” for the region’s economies have risen. Hungary’s forint and Poland’s zloty depreciated against the Swiss franc, reviving concern borrowers with foreign-currency loans may default.
Trichet’s comments “put pressure on the euro, leading to a decrease in the appetite for risk and cooled market sentiment,” Vyacheslav Smolyaninov, a Moscow-based strategist at UralSib Financial Corp., said in an e-mailed note today. Speeches by Obama and U.S. Federal Reserve Chairman Ben S. Bernanke “yesterday also failed to impress markets,” he said.
Speculation that Greece could default on its debt fueled a global equities rout. Germany set plans to shore up the nation’s banks in the event Greece defaults, according to three coalition officials who spoke on condition of anonymity.
Eastern European Banks
OTP Bank Nyrt., Hungary’s largest lender, plunged 11 percent after the ruling party proposed allowing foreign-currency borrowers to repay loans early at a fixed rate with banks covering costs. Trading was briefly suspended after the price breached the 10 percent limit, dropping as much as 15 percent.
The forint slipped 1.8 percent against the Swiss franc and 1.1 percent versus the euro.
Banks in Poland also slid. PKO Bank Polski SA, the country’s biggest lender, lost 7.2 percent and Bank Pekao SA, majority-owned by UniCredit SpA, declined 6.1 percent.
The zloty weakened 1.5 percent against the franc, falling for a second day. Foreign-currency mortgage loans, most denominated in Swiss francs, made up 63 percent of all home loans in Poland, according to the country’s financial regulator.
OGX Petroleo & Gas Participacoes SA, the oil company controlled by billionaire Eike Batista, tumbled 7.1 percent and iron-ore miner MMX Mineracao & Metalicos SA fell 4.7 percent, following crude and metals prices lower as Obama’s jobs plan underscored concern the U.S. recovery is faltering.
The real declined for a sixth straight day, falling 0.8 percent to 1.6741 per dollar, the weakest closing level since March.
Israel’s foreign and local currency ratings were raised one step to A+ by Standard & Poor’s, which cited rapid economic growth and possible debt reduction. The upgrade to the fifth-highest investment grade status brings S&P’s rating in line with Moody’s Investors Service and one notch higher than Fitch Ratings’ assessment.
Emerging-market equity funds reported a sixth week of outflows amid signs that the global economic recovery is faltering, Citigroup Inc. said.
Funds investing in developing-nation stocks reported withdrawals of $1 billion in the week ended Sept. 7, Citigroup analysts led by Markus Rosgen wrote in a report today, citing figures compiled by EPFR Global. That compared with outflows of $600 million in the week ended Aug. 31 and withdrawals of $7.7 billion in the week to Aug. 10, the third largest on record.
Russia’s Micex snapped a three-day streak of gains to decline 2.5 percent as crude fell for a second day. OAO Rosneft, Russia’s largest oil producer, plummeted 3 percent.
The Shanghai Composite Index slipped less than 0.1 percent after China’s industrial output growth trailed estimates. The gauge has lost 1.2 percent this week and 11 percent this year.