Emerging-market stocks slid to a two-month low and currencies weakened as Italy’s inconclusive election revived European debt concerns and investors speculated China will announce new property curbs.
Erste Group Bank AG tumbled the most in three weeks in Prague as the PX Index drove declines among major emerging markets. Petroleo Brasileiro SA plunged to the lowest close since November 2005 and Evergrande Real Estate Group Ltd. sank to a three-month low in Hong Kong. Russia’s ruble and the Indian rupee weakened against the dollar, while Poland’s zloty depreciated against the euro.
The MSCI Emerging Markets Index fell 1.1 percent to 1,042.71 in New York, its lowest close since Dec. 17. Early results suggested Italy’s election would lead to a political vacuum of at least a month. The 21 countries in the developing-nations gauge send about 26 percent of their exports to the European Union on average, data compiled by the World Trade Organization show.
“People were of the view the euro-area situation was somewhat stabilizing, but Italy’s election just comes back to haunt investors,” Aryam Vazquez, a global emerging markets economist at Wells Fargo in New York, said by phone today. “Sentiment is a bit guarded, but for emerging markets as a whole, the long-term outlook provides a floor to further downside risk.”
The iShares MSCI Emerging Markets Index exchange-traded fund, the ETF tracking developing-nation shares, added 0.6 percent to 42.94 after falling 1.3 percent yesterday. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, dropped 7.4 percent to 20.25.
The S&P/Case-Shiller index of property values increased 6.8 percent from December 2011, the biggest year-to-year gain in U.S. home prices since July 2006, a report showed today in New York. Purchases of new homes surged in January by the most in two decades, and consumer sentiment index climbed to 69.6, beating all estimates in a Bloomberg survey, other data showed.
Federal Reserve Chairman Ben Bernanke defended the central bank’s unprecedented asset purchases as he and his colleagues on the Federal Open Market Committee debate whether to curtail $85 billion in monthly bond-buying. The purchases are supporting economic recovery with little risk of inflation or asset-price bubbles, Bernanke said today in testimony to the Senate Banking Committee in Washington.
Election results in Rome showed pre-contest favorite Pier Luigi Bersani won the lower house by less than a half a point. Silvio Berlusconi, the former premier who has vowed to reverse austerity measures, won a blocking minority in the Senate. An Italian government requires a majority in both houses. President Giorgio Napolitano may install an interim government to write a new election law as the prelude to another vote. That would extend the political deadlock through most of 2013.
“Although this clearly represents a much less certain environment for markets it does not inevitably mean that Italy faces a return to crisis conditions,” Michael Shaoul, chief executive officer of Marketfield Asset Management LLC in New York, wrote in an e-mail today.
OTP Bank Nyrt., Hungary’s biggest lender, fell to the lowest level in three weeks as the nation’s BUX Index tumbled 1.8 percent to the lowest level since Dec. 28, while the forint weakened 0.2 percent against the euro. The nation’s central bank cut the benchmark interest rate for a seventh month to a record low today as policy makers fight a recession. It was Magyar Nemzeti Bank President Andras Simor’s final policy meeting.
OTP sank 3.5 percent. Mol Nyrt., Hungary’s largest refiner, fell 1.6 percent after reporting fourth-quarter profit that was below what analysts estimated as the recession crimped fuel sales, Syrian production ceased and gas trading in Croatia suffered a loss.
The Czech Republic’s benchmark gauge sank 2.1 percent in its biggest drop in seven months, as Erste slid 3.4 percent.
Brazil’s Bovespa added 0.6 percent as Gerdau SA led a rally in Brazilian steelmakers spurred by speculation that a surge in U.S. home sales will bolster demand for metals. Gerdau, Latin America’s largest steelmaker jumped 3.3 percent in a fourth day of gains.
Petrobras, as the state-run oil company Petroleo Brasileiro is known, dropped 1.2 percent on a fifth day of declines. Oil slid 0.5 percent in New York to the lowest settlement since Dec. 31 as supplies probably climbed to a seven-month high last week, a Bloomberg survey showed before government data tomorrow.
Russia’s Micex Index retreated 1.3 percent, declining for the first time in three days. Power producer OAO Mosenergo fell 3.1 percent in Moscow after President Vladimir Putin ordered ministries to cap growth in tariffs at 6 percent a year, the RIA Novosti newswire reported yesterday, citing the president’s comments at a government meeting.
Mail.ru Group Ltd. jumped 4.3 percent in London after the Russian Internet company said it plans to pay $899 million in special dividends next month after reducing its stake in Facebook Inc. and exiting investments in Groupon Inc. and Zynga Inc. Mail.ru will pay investors $4.30 a share as of March 20, the Moscow-based company said today in a regulatory filing.
Poland’s WIG20 Index retreated 1.1 percent to close at the lowest level since Nov. 30. Polskie Gornictwo Naftowe i Gazownictwo SA, the country’s biggest gas distributor, lost 3.5 percent and Bank Millennium SA, the Polish unit of Banco Comercial Portugues SA, slid 2.2 percent.
“Emerging markets in Europe have been hit by renewed worries about the euro zone,” Gaelle Blanchard, an emerging-market strategist at Societe Generale SA in London, said by e-mail. “The zloty is the highest beta in the region. It’s generally the proxy for eastern Europe.”
Central European Distribution Corp., the Polish vodka distiller rescued by Russian billionaire Roustam Tariko last year, added 5.1 percent to 65 cents in New York today after yesterday’s 55 percent plunge. The company has proposed swapping bonds for equity to cut its debt by more than $750 million. CEDC shares traded in Warsaw sank for a third trading day, sliding 42 percent to a record-low 2.18 zloty, or 68 cents. CEDC’s Polish stock fell 20 percent yesterday.
Gauges of financial and energy stocks in the MSCI Emerging Markets Index declined at least 1.6 percent, the most among 10 industry groups. The broader measure has fallen 1.2 percent this year, compared with a 3.6 percent advance in the MSCI World Index. The emerging-markets index trades at 10.4 times projected 12-month earnings, compared with the MSCI World’s multiple of 13.6, data compiled by Bloomberg show.
The extra yield investors demand to hold emerging-market debt over U.S. Treasuries fell 1 basis point, or 0.01 percentage point, to 288 basis points, according to the JPMorgan EMBI Global Index.
The Bloomberg China-US Equity Index of the most-traded Chinese companies in the U.S. climbed 0.3 percent, rebounding from a 12-week low, as companies reporting better-than-estimated earnings spurred analysts to bolster the outlook for stocks. Shanda Games Ltd. climbed 2.7 percent and Mindray Medical International Ltd. surged 2.8 percent to the highest level in February.
The Bloomberg China-US Equity Index of the most-traded Chinese companies in the U.S. added 0.3 percent to 93.10 in New York, rebounding from a 12-week low. Mindray Medical International Ltd. surged the most in a month as Oppenheimer & Co. lifted its price target for by 15 percent after the health-care company’s profit beat projections.
India’s S&P BSE Sensex Index fell 1.6 percent to the lowest since Nov. 27. The Jakarta Composite Index dropped 0.7 percent from a record. The Philippine Stock Exchange Index slid 1.4 percent, the most in 10 weeks after valuations climbed to an all-time high.
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong retreated 2 percent to its lowest level since Dec. 11. The Shanghai Composite Index of domestic Chinese stocks slumped 1.4 percent.
Chinese equities slumped on speculation the government will announce curbs on the property markets during a legislative meeting next week and after money-market rates jumped. The Shanghai Securities News said the city of Guangzhou plans to announce housing restrictions. Evergrande, China’s biggest developer by sales volume, fell 4.3 percent.
“There’s too much uncertainty before the National People’s Congress,” said Xu Shengjun, an analyst at Jianghai Securities Co. in Shanghai. “People are worried there will be even more tightening measures for the property sector.”
Hanwha Life Insurance Co., South Korea’s second-largest life insurer, tumbled 9.8 percent, the biggest decline in the MSCI Emerging Markets Index, after a shareholder sold stock at a discount.