Emerging-market stocks fell for a fifth day as data showing faster U.S. inflation fueled speculation that the Federal Reserve may raise interest rates faster than expected.
The MSCI Emerging Markets Index declined 0.3 percent to 1,043.53. Stock indexes in Russia and Ukraine declined at least 0.5 percent. Indonesia’s rupiah slid to a four-month low against the dollar, while the Russian ruble lost 0.5 percent. Brazil’s Ibovespa fell for a third day. The Borsa Istanbul 100 Index gained 0.5 percent.
U.S. consumer prices rose 0.4 percent in May, exceeding the 0.2 percent median forecast of analysts surveyed by Bloomberg. A pickup in inflation lessens the threat of a prolonged drop in prices that hurts economic growth, giving policy makers reason to continue trimming a bond-buying program as they start a two-day meeting today. The Fed will probably raise its benchmark interest rate faster than money-market investors expect, based on a Bloomberg News survey of economists.
“The market is worried that the stronger-than-expected CPI print may force the Fed to hike rates earlier,” Michael Wang, an emerging-market strategist in London at Amiya Capital LLP, said by e-mail. “This reduction in liquidity would hurt EM.”
A Bloomberg gauge tracking 20 emerging-market currencies dropped 0.4 percent in its third straight decline. The premium investors demand to own developing-nation debt over U.S. Treasuries narrowed three basis points, or 0.03 percentage point, to 265 basis points, according to JPMorgan Chase & Co. Indexes.
Six out of 10 industry groups in the MSCI Emerging Markets Index fell, led by consumer staples companies. Petroleo Brasileiro SA, the Brazilian state-run oil producer, slumped 2.2 percent in its second day of declines. The Ibovespa dropped 0.6 percent.
The Fed this week will cut its asset-purchase program by $10 billion for the fifth straight month, to $35 billion, according to the median of 43 economists’ estimates compiled by Bloomberg. The central bank’s bond purchases have helped fuel gains in emerging-market assets as low interest rates in the U.S. spurred investors to buy riskier securities.
The UX Index decreased 1.5 percent in Kiev and the Micex lost 0.5 percent in Moscow. Russia’s largest retailer, OAO Magnit, slid 1.1 percent.
The ruble weakened for a fifth day, falling to 34.8150 per dollar, as the central bank took steps to make the currency more flexible by scaling back potential support.
Ukraine is sending a delegation for talks with European Union officials aimed at securing natural gas supplies after Russia cut off deliveries as government troops battled separatist rebels.
“The situation in Ukraine continues to weigh on sentiment because we’re not seeing any progress,” Yuri Selyandin, a money manager who helps oversee about $2 billion at GHP Group in Moscow, said by phone. “Over the past months, we’ve seen strong growth in the stock market, people are taking profits.”
The developing-nation gauge slid 1.1 percent in the four days through yesterday as Sunni Muslim insurgents captured territory in northern Iraq and violence claimed more lives in eastern Ukraine. U.S. President Barack Obama is considering air strikes to support Iraqi government attempts to stem the offensive. Iraqi shares ended an eight-day slump today and the Borsa Istanbul 100 Index gained 0.4 percent, after dropping 2.7 percent in the previous two days.
The MSCI Emerging Markets Index has advanced 4.1 percent this year and trades at 10.9 times 12-month estimated earnings, according to data compiled by Bloomberg. The MSCI World Index has risen 4.1 percent and is valued at a multiple of 15.1 times.
The S&P BSE Sensex index jumped 1.3 percent at the close in Mumbai. The Shanghai Composite Index retreated the most in a month while Taiwan’s Taiex Index reached a six-year high.
The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong lost 0.5 percent, halting a two-day increase. The rupiah lost 0.6 percent while the Thai baht and South Korean won weakened at least 0.2 percent.