Emerging-market stocks declined as Chinese shares fell in volatile trading, outweighing gains in Brazil, where equities rebounded from the longest slump since 2013.
The MSCI Emerging Markets Index fell 0.2 percent to 891.24 in New York. The gauge has dropped 8.3 percent in July, on pace for the steepest monthly slide in more than three years. Mainland Chinese stocks on the Shanghai Composite Index, known as A shares, slid 1.7 percent in a third day of declines. The Ibovespa rose for the first time in eight days in Sao Paulo, rallying 1.8 percent even after Standard & Poor’s changed the outlook on Brazil’s credit rating to negative.
The developing-nation stock gauge has dropped 16 percent from its high in April. Declines have accelerated amid speculation that China will fail to halt a rout that sparked the biggest one-day slump since 2007 in Shanghai on Monday. Investors are also looking for clues on the timing of the first U.S. interest-rate increase since 2006 as policy makers start a two-day meeting.
“We still have no clarity about the timing of the first U.S. rate rise and much less about its effect on markets,” Tony Hann, the head of emerging markets at Blackfriars Asset Management Ltd. in London, said by e-mail. “We don’t know what the Chinese government thinks is a suitable level to hold the A-share market.”
Six out of 10 industry groups on the emerging-market equity index declined, led financial shares. A gauge of 20 developing-nation currencies was little changed, holding near a record low. Russia’s ruble weakened 0.6 percent against the dollar as Brent crude traded below $55 a barrel for a third day.
The ruble’s weakness is raising the likelihood that Russia’s central bank will hold off on cutting interest rates on July 31. The nation’s five-year bonds fell, sending yields up 10 basis points to 11.18 percent in their seventh day of increases.
Itau Unibanco Holding SA led gains among Brazilian lenders, rising 1.8 percent. Banco Bradesco SA jumped 1.3 percent. The Ibovespa rallied after a seven-day slump pushed the average valuation of stocks on the benchmark to the lowest level in four months, according to data compiled by Bloomberg based on estimated earnings. S&P lowered its outlook on Brazil’s credit rating from stable, citing the country’s political and economic challenges amid a corruption probe.
Turkey, a key beneficiary of lower oil prices because it imports more than 90 percent of its crude, has seen its markets suffer this month as offensives in Syria and Iraq compounded risks. The selloff sent stock valuations to the lowest level in more than a year, helping boost the Borsa Istanbul 100 Index 0.9 percent on Tuesday.
Stocks in the emerging-markets gauge sell for an average 11.1 times projected 12-month earnings. That compares with a multiple of 16.3 for the MSCI World Index, which has gained 0.7 percent in July. The premium investors demand to own emerging-market bonds over U.S. Treasuries narrowed two basis points to 372 basis points on Tuesday, according to JPMorgan Chase & Co. indexes.
The Shanghai Composite Index fell as much as 5.1 percent and gained as much as 1 percent in volatile trading before closing lower. China Securities Finance Corp., a state-backed agency that provides margin financing and liquidity, hasn’t exited the stock market, China Securities Regulatory Commission spokesman Zhang Xiaojun said after the close of trading on Monday.