Emerging-Market Stocks Fall on European Debt, Hungary Concerns
Emerging-market stocks declined after a jump in French and Hungarian borrowing costs signalled a widening of European debt concerns.
The MSCI Emerging Markets Index (MXEF) fell 0.3 percent to 934.47 as of 12:39 p.m. in London. The BUX Index (BUX) slid 2.6 percent in Budapest, taking its three-day decline to 5.9 percent on concern the International Monetary Fund and the European Union won’t resume aid talks. The WIG20 Index (WIG20) dropped 1.9 percent in Warsaw. Benchmark indexes slid at least 0.4 percent in Russia, Turkey and South Africa. The Hang Seng China Enterprises Index (HSCEI) advanced 0.5 percent in Hong Kong.
France sold 4.02 billion euros ($5.2 billion) of benchmark 10-year bonds at an average yield of 3.29 percent, up from 3.18 percent in a sale on Dec. 1. Hungary sold 35 billion forint ($140 million) in 1-year bills, 10 billion forint less than the planned amount. The average yield was 9.96 percent, compared with 7.91 percent at the last sale of that maturity on Dec. 22 and the highest since April 2009.
“Europe has real problems” and “policy makers have not got on top of that so I think we can expect further volatility,” Geoff Lewis, head of investment services at JPMorgan Asset Management in Hong Kong, said in a Bloomberg Television interview today.
The EU and the IMF broke off aid talks with Hungary last month as the government prepared legislation that threatened to undermine the independence of the central bank, with no plans to return to negotiations. Standard & Poor’s is reviewing the top credit ratings of both France and Germany.
OTP Bank Nyrt. (OTP), Hungary’s largest lender, slid 2.6 percent in Budapest. Hungary needs a deal as soon as possible to help maintain market financing and is ready to discuss the conditions, Tamas Fellegi, the minister assigned to lead the talks, told reporters today.
“Fellegi’s comments are aimed at providing reassurance, but I think the market will adopt a seeing is believing approach,” Timothy Ash, a London-based economist at Royal Bank of Scotland Group Plc, said in a e-mailed comment. “Market trust in this administration is now at rock bottom levels.”
The Micex Index (MICEX) fell 0.7 percent in Moscow, heading for the first daily loss since Dec. 28. OAO Rosneft (ROSN), Russia’s biggest oil company, fell 1.1 percent as crude oil futures declined 0.4 percent to $102.84 in New York.
The ruble depreciated 0.7 percent against the dollar and the rand fell 0.6 percent. The Mexican peso weakened by 0.6 percent.
The extra yield (JPEGSOSD) investors demand to own emerging-market debt over U.S. Treasuries rose two basis points, or 0.02 percentage point, to 421, according to JPMorgan Chase & Co. (JPM)’s EMBI Global Index.
The Markit iTraxx SovX CEEMEA Index (ITXSCE) of eastern European, Middle East and Africa credit-default swaps rose nine basis points to 367, according to data provider CMA.
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