Emerging-Market Stocks Decline After Europe Leaders Withhold Greece Aid
Emerging-market stocks fell, extending their drop this month, as worries about the European debt crisis persisted and the Greek Finance Minister said the country won’t hold a referendum.
The MSCI Emerging Markets Index slid 0.3 percent to 973.99 at 4:55 p.m. in New York, paring an earlier drop of 1.8 percent. The Hang Seng China Enterprises Index fell 1.4 percent after a gauge of non-manufacturing output fell. Brazil’s Bovespa gained 1.5 percent, led by oil producers, as the European Central Bank’s unexpected interest-rate cut eased concern over the potential fallout from the region’s debt crisis. Mexico’s benchmark rose 2.3 percent. The Micex Index jumped 0.8 percent in Moscow and the WIG20 Index added 1.8 percent in Warsaw.
German and French leaders holding emergency talks on the eve of a Group of 20 summit in Cannes, France, withheld 8 billion euros ($11 billion) of assistance. They warned Greece will surrender all aid if it votes against a bailout package.
Greek Prime Minister George Papandreou clung to power after abandoning a referendum on bailout terms that had triggered a suspension of European aid. Italian Prime Minister Silvio Berlusconi was pushed by German Chancellor Angela Merkel to accelerate an austerity drive as Greek bond yields jumped to a euro-era record.
“Everything today is influenced by the situation in Greece,” Daniel Lenz, Frankfurt-based chief emerging markets strategist at DZ Bank AG, said in a phone interview. “The expectation is that we might face some uncertainties for a while.”
“The most important aspect of our task over the next two days is to resolve the financial crisis here in Europe,” U.S. President Barack Obama said between one-on-one meetings with French President Nicolas Sarkozy and Merkel. Europe needs to “flesh out more of the details” of its week-old bailout blueprint, he said.
The ECB cut its benchmark interest rate by 25 basis points to 1.25 percent. With the region’s economic slowdown deepening and investors growing increasingly concerned, the ECB was under pressure to reverse this year’s two rate increases.
Rand, Lira, Ruble
Most emerging-market currencies tracked by Bloomberg rose today. The rand reversed earlier losses and added 1.5 percent against the dollar. The lira strengthened 1.5 percent. The ruble rose 0.1 percent after earlier having fallen as much as 1.3 percent.
A BBC report said Papandreou will step down today and propose a coalition government headed by former ECB Vice- President Lucas Papademos, without saying how it got the information. Later, two officials with the ruling Pasok party said Papandreou won’t resign his post.
Papandreou said it would be irresponsible for the government to resign, as he spoke in parliament in Athens tonight.
Petroleo Brasileiro SA, Brazil’s state-controlled oil company, and OGX Petroleo & Gas Participacoes SA, controlled by billionaire Eike Batista, followed crude prices higher in Sao Paulo. Gol Linhas Aereas Inteligentes SA, Brazil’s second- biggest airline by market value, jumped 8.5 percent after Morgan Stanley raised its stock recommendation. Vale SA (VALE5), the world’s largest iron-ore producer, rose 3.2 percent.
The ISE National 100 Index (XU100) gained 1.4 percent in Istanbul. Turkcell Iletisim Hizmetleri AS, Turkey’s biggest mobile-phone company, jumped 7.8 percent, the biggest increase in almost three months, as its third-quarter profit beat estimates.
PetroChina Co. led declines among Chinese shares in Hong Kong, falling 3.8 percent.
China’s purchasing managers’ index of non-manufacturing industries fell to 57.7 in October from 59.3 the previous month, the China Federation of Logistics and Purchasing said on its website today.
South Korea’s Kospi Index (KOSPI) lost 1.5 percent and Taiwan’s Taiex Index dropped 1.8 percent.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries eased 18 basis points, or 0.18 percentage point, to 387, according to JPMorgan Chase & Co. (JPM)’s EMBI Global Index.
The Markit iTraxx SovX CEEMEA Index of eastern European, Middle East and Africa credit-default swaps declined seven basis points to 285, according to data provider CMA.
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