Emerging Stocks Slump as Europe Crisis Sends Commodities Down

Emerging-market stocks fell for a fifth day as doubts about Europe’s efforts to tame the debt crisis pushed commodities to the largest drop since September.

The MSCI Emerging Markets Index slipped 1.4 percent to 903.95, the lowest close since Nov. 28. Brazil’s Bovespa fell as domestic growth slowed more than forecast in Latin America’s largest economy. China’s Shanghai Composite Index retreated 0.9 percent. The ISE National 100 Index slid 2.3 percent in Turkey.

Plans to amend European Union rules to create a closer fiscal union face misgivings from the European Commission, the Handelsblatt newspaper said. Italy had to pay the most in 14 years to sell five-year bonds. The Standard & Poor’s GSCI index of 24 raw materials fell 4.1 percent as gold futures fell below $1,600 an ounce and oil dropped 5.2 percent in New York.

“It is becoming very apparent that Western Europe is going into a recession and that would be a negative for emerging-market countries,” Komal Sri-Kumar, chief global strategist at Los Angeles-based TCW Group Inc., said in an interview. Investors “think the global economy is going to slow down quite significantly in 2012.”

Moody’s Investors Service said on Dec. 12 that last week’s euro crisis summit didn’t provide new measures that would lead to a resolution of Europe’s debt problems, and it would review European Union sovereign ratings in the first quarter of 2012. Standard & Poor’s said before the meeting that it may cut the credit rankings of euro members.

The emerging markets gauge has fallen 21 percent this year, exceeding the 11 percent drop for the MSCI World developed markets index. The developing markets measure trades at 9.9 times estimated earnings, below the 11.7 multiple for developed markets.

Brazil Economy Shrinks

Brazil’s economy shrank for a third month in October, the central bank said in a report on its website. Seasonally adjusted economic activity fell 0.32 percent, sharper than the median forcast for a 0.1 percent contraction from 27 analysts surveyed by Bloomberg.

Miner Vale SA and oil company OGX Petroleo & Gas Participacoes SA, the Bovespa index’s second- and third-heaviest-weighted companies, followed metals and crude lower. Vale dropped 1.5 percent, while OGX retreated 3.7 percent.

Turkish stocks slipped after the Sabah newspaper reported that the head of economic policy for the country’s governing party called for a probe into Turkiye Is Bankasi AS’s relationship with the main opposition party.

Isbank, the country’s biggest lender by assets, fell 4.4 percent in Istanbul, declining for the fifth day to the lowest level since July 2009. Bulent Gedikli, a deputy chairman of the ruling Justice and Development Party, said lawmakers should look into whether the opposition party uses its 28 percent stake to influence the bank’s policy, Sabah said.

BHP Billiton Plc, the world’s largest mining company, was the biggest decliner by index points in Johannesburg trading, falling 2.3 percent and dragging the FTSE/JSE Africa All Share Index 1.5 percent lower.

Italian Bonds

South African stocks have fallen 1.2 percent this year, the worst performance since a 26 percent slump in 2008. Citigroup Inc. projects a rally of more than 15 percent next year on rising mining production and domestic demand.

The Italian Treasury sold 3 billion euros ($3.9 billion) of five-year bonds, the maximum for the sale, to yield 6.47 percent, the most since May 1997 and up from 6.29 percent at the last auction on Nov. 14.

The Ifo Institute in Munich cut its 2012 growth forecast for Germany to 0.4 percent from 2.3 percent today.

Brazil’s real slid for a third day, losing 0.9 percent against the dollar. Chile’s peso depreciated 1.1 percent while Peru’s sol dropped 0.2 percent.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries increased 7 basis points, or 0.07 percentage points, to 422, according to JPMorgan Chase & Co.’s EMBI Global Index.

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