Emerging-market currencies posted a seventh straight weekly decline and stocks slumped as data showing the U.S. economy continued to strengthen bolstered the case for the Federal Reserve to raise interest rates.
A Bloomberg gauge tracking 20 developing-nation currencies slid 0.9 percent in the five days through Friday. The ruble led the decline, dropping 3.6 percent as crude, Russia’s biggest export, slumped deeper into a bear market. The real fell 2.4 percent and Brazilian bond yields surged as concern mounted that the country’s credit rating will be cut to junk. The MSCI Emerging Markets Index slid 1.8 percent for the week to 885.07, led by technology and energy stocks.
Investors have been withdrawing from developing nations amid mounting concern that an improving U.S. economy may prompt the Fed as soon as next month to raise the near-zero interest rates that have supported demand for riskier assets. A Labor Department report showed U.S. employers added 215,000 jobs in July and the unemployment rate held at a seven-year low of 5.3 percent. Data on Thursday showed filings for U.S. unemployment benefits near four-decade lows.
“The payroll numbers were in line with expectations, and we see that the market anticipates the Fed rate hike,” Wayne Lin, a money manager at QS Investors in New York, said by phone. “The Fed increasing interest rates is obviously not a good outcome for emerging-market stocks.”
The MSCI developing-nation equity gauge gained less than 0.1 percent Friday. The Bloomberg currency index added 0.2 percent.
Six out of ten industry groups in the stock measure slid Friday, led by a 0.6 percent decline in consumer discretionary shares. Sappi Ltd., the world’s largest producer of dissolving wood pulp, dropped the most among raw-material companies, slumping 6.6 percent after its third-quarter profit fell 76 percent.
The developing-nation stock gauge has lost 7.5 percent this year and trades at 11.2 times projected 12-month earnings, data compiled by Bloomberg show. The MSCI World Index has risen 2.2 percent in 2015 and is valued at a multiple of 16.3.
Petroleo Brasileiro SA, the Brazilian state-run oil producer at the center of a corruption probe, fell 6.1 percent after reporting earnings that trailed forecasts. The Ibovespa dropped 2.9 percent.
The ruble swung between gains and losses, trading near the lowest since February against the dollar as oil posted a sixth straight weekly decline. A 14 percent slump since the end of June, the most among 31 major currencies tracked by Bloomberg, has pushed the ruble’s relative strength index for the past week below 30, the threshold signaling to some technical analysts that an asset is oversold.
The Shanghai Composite Index climbed for the first time in three days. The gauge has advanced 2.2 percent this week. China Construction Bank Corp. led a 1.2 percent increase in Hong Kong’s Hang Seng China Enterprises Index.
China Securities Finance Corp.,which mandated to buy stocks to bolster the market, is seeking access to an additional 2 trillion yuan ($322 billion), said people with knowledge of the matter. The extra funding China Securities Finance is seeking would add to the 3 trillion yuan already made available by the government, according to the people, who asked not to be identified because the target hasn’t been made public.
The government has spent as much as 900 billion yuan ($145 billion) in the past two months to prop up the nation’s stock prices, according to Goldman Sachs Group Inc.
The premium investors demand to hold emerging-market debt over U.S. Treasuries widened six basis points to 378 basis points, according to JPMorgan Chase & Co. indexes.