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Emerging Stocks Decline on Fed Bets as Gold Shares Tumble

Dec. 12 (Bloomberg) -- Emerging-market stocks dropped to a one-month low amid speculation the Federal Reserve will reduce stimulus as early as next week. South Africa’s equity benchmark led losses among world gauges as gold producers tumbled.

The MSCI Emerging Markets Index retreated 1.1 percent to 991.52, the lowest level since Nov. 13. The FTSE/JSE Africa All Shares Index dropped the most among 94 global gauges as AngloGold Ashanti Ltd. tumbled 7.3 percent in Johannesburg. Benchmark stock indexes in Russia, Poland and the Philippines and decreased at least 1 percent, while Brazil’s Ibovespa rebounded from a three-month low. India’s rupee drove declines among the 24 developing-nation currencies tracked by Bloomberg.

Stocks dropped after better-than-estimated U.S. retail sales data added to speculation the Fed will cut stimulus. The U.S. central bank may begin reducing its $85 billion of monthly bond purchases at its Dec. 17-18 meeting, according to 34 percent of economists surveyed Dec. 6 by Bloomberg, up from 17 percent in a Nov. 8 poll. Gold and silver tumbled as the U.S. dollar advanced against most major global currencies.

Today’s decline in stocks “is very much a reaction to what’s happening in the States,” Julian Mayo, who helps manage about $2.7 billion in emerging-market assets as the co-chief investment officer at Charlemagne Capital Ltd. in London, said by phone. “A lot of it must already be in the price.”

The gauge for stocks in developing nations has slid as much as 16 percent since May 22, when the U.S. central bank signaled its asset-buying program could be trimmed if the economy showed sustained improvement.

Emerging ETF

The iShares MSCI Emerging Markets Index exchange-traded fund retreated 0.6 percent to $40.85. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, declined 1.6 percent to 25.60.

Brazil’s Ibovespa rebounded from earlier losses on speculation the central bank will limit interest-rate increases, offsetting a slump by commodity producers. Homebuilder MRV Engenharia e Participacoes SA rallied the most in three weeks.

Russian shares fell as OAO Gazprom, the nation’s biggest natural-gas producer, and retailer OAO Magnit tumbled. Poland’s WIG20 Index slid to the lowest in two months, while the Borsa Istanbul National 100 Index capped a three-day drop. Benchmark gauges in Hungary and the Czech Republic also retreated.

The FTSE/JSE Africa All Shares Index posted the biggest decline since June, as AngloGold Ashanti sank to a four-month low, while DRDGOLD Ltd. plunged 12 percent.

Tata Motors

India’s S&P BSE Sensex lost 1.2 percent as Tata Motors Ltd., owner of Jaguar Land Rover, slumped the most in 10 months. Cellular-phone operator Bharti Airtel Ltd. declined to a two-week low. Engineering company Larsen & Toubro Ltd. had its steepest three-day slide in four months. The rupee weakened the most in a month.

The Philippine Stock Exchange Index fell 2.1 percent before the central bank’s announcement on holding the benchmark interest-rate at a record low for a ninth meeting to boost the economy’s recovery from Super Typhoon Haiyan.

Most Chinese stocks rose as Shanghai-based companies rallied on speculation the local government is speeding up state-owned enterprise reform to boost profitability. Shanghai Lansheng Corp. surged 10 percent after the government approved its restructuring plan and Goldman Sachs Group Inc. said SOE reform may reverse the Chinese stock market’s underperformance.

The premium investors demand to own emerging-market debt over U.S. Treasuries fell five basis points, or 0.05 percentage point, to 323 basis points, according to JPMorgan Chase & Co.

To contact the reporters on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net; Maria Levitov in London at mlevitov@bloomberg.net

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

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