Emerging-market stocks retreated for a third day as South Korean builders declined with Indian equities and violence in Iraq drove crude prices higher.
Indian Oil Corp., the nation’s largest state-run refiner, slumped the most in 11 months. Hanwha Corp. and Daewoo Engineering & Construction Co. each tumbled 4.5 percent on speculation their projects in Iraq will be delayed. Iron-ore producer Vale SA led Brazil’s Ibovespa lower as prices for the raw material sank. The rand lost 0.1 percent after Fitch Ratings revised South Africa’s credit-rating outlook to negative. Iraqi bonds were set for their worst week in a year.
The MSCI Emerging Markets Index retreated 0.4 percent to 1,050, trimming this week’s gain to 0.5 percent. West Texas Intermediate and Brent crudes posted the biggest weekly gains this year as escalating violence in Iraq threatened supplies from OPEC’s second-largest producer.
“The Iraq situation and the rising oil price is reducing risk appetite toward markets in general, but EM in particular,” Maarten-Jan Bakkum, an emerging-markets strategist at ING Investment Management Co. in The Hague, said by e-mail. South Korea and India are down because they are “among the most sensitive markets to higher oil prices. Both are big oil importers,” he said.
Crude futures climbed 0.4 percent in New York, pushing this weeks gain to 4.1 percent. A Bloomberg index tracking 20 emerging-market currencies declined 0.2 percent, bringing this week’s drop to 0.5 percent. The premium investors demand to own developing-nation debt over U.S. Treasuries fell two basis points, or 0.02 percentage point, to 263, according to JPMorgan Chase & Co. indexes.
Nine out of 10 industry groups in the MSCI Emerging Markets Index dropped, led by technology shares. Samsung Electronics Co., Asia’s largest consumer electronics company, declined 3.8 percent to the lowest level in a month.
Iraqi Oil Minister Abdul Kareem al-Luaibi speculated that U.S. planes may bomb his nation’s north as militants linked to al-Qaeda, who captured the city of Mosul this week, moved south toward Baghdad. The member of the Organization of Petroleum Exporting Countries produced 3.3 million barrels a day last month, data compiled by Bloomberg show.
The yield on Iraq’s $2.7 billion of bonds maturing in January 2028 climbed six basis points to 6.93 percent, taking this week’s increase to 55 basis points, the most since the period ended June 21, 2013. The Borsa Istanbul 100 Index lost 1 percent and the lira sank 0.6 percent. Turkey, which shares a border with Iraq, is a net oil importer and is struggling to narrow its current-account deficit.
Hanwha sank to a two-year low and Daewoo Engineering slumped for a fourth day in Seoul.
“Global market sentiment has been hit,” Ryan Huang, a markets strategist at IG Ltd., said by e-mail. “This is pushing many investors out of equities and into safe haven assets such as silver and gold.”
Indian Oil, the nation’s largest state-run refiner, slid 5.4 percent. Higher fuel costs may stoke inflation in a country that buys about 80 percent of its crude from abroad, undermining Indian Prime Minister Narendra Modi’s efforts to curb consumer prices and revive economic growth from near the weakest level in a decade. The rupee lost 0.9 percent, depreciating for the first time in three days.
The Ibovespa retreated 0.5 percent as Vale tumbled 2.5 percent. Iron ore with 62 percent iron content delivered to the port of Tianjin, China, declined 0.7 percent to $90.90 a dry ton today, the lowest since September 2012, according to The Steel Index Ltd.
Russia’s ruble fell 0.2 percent against the dollar and the Ukrainian hryvnia depreciated 0.9 percent. Russia’s stock market was closed for a holiday. Ukraine stepped up its push to stem deadly separatist violence in its easternmost regions as former U.S. Secretary of State Hillary Clinton accused Russia of continuing to unsettle its neighbor.
The developing-nation gauge has risen 4.7 percent this year and is valued at 11 times 12-month projected earnings, data compiled by Bloomberg show. The MSCI World Index has increased 4 percent and is valued at a multiple of 15.1.
The rand posted a third weekly loss. Fitch revised South Africa’s credit rating outlook because of a deterioration in the country’s growth prospects.
Industrial & Commercial Bank of China Ltd. led a 0.8 percent increase in the Hang Seng China Enterprises Index after new bank lending beat estimates and industrial output growth accelerated. The Shanghai Composite Index rose 0.9 percent to the highest level since April 22.
China’s industrial output climbed 8.8 percent in May from a year earlier, matching the median estimate in a Bloomberg News survey. Retail sales grew 12.5 percent, compared with the median projection for a 12.1 percent gain.