Emerging Stocks Tumble on Stimulus Outlook Led by Russia
Emerging-market stocks declined for the first time in six days, led by Russian shares, as improving U.S. economic reports increased prospects for less stimulus. Egyptian bond yields surged to a five-week high amid a government crackdown on protesters that left hundreds dead.
The MSCI Emerging Markets Index retreated 0.8 percent to 960.48. The Micex Index (INDEXCF) capped the biggest decrease in two months as OAO Gazprom, Russia’s natural-gas export monopoly, tumbled 2.6 percent, while Brazilian oil company OGX Petroleo e Gas Participacoes SA tumbled 7.4 percent in Sao Paulo. The yield on Egypt’s dollar bond due April 2020 advanced to 9 percent. Mexico’s peso extended a five-day drop to 1.7 percent.
Stocks joined a global slump after data showed U.S. jobless claims dropped to the lowest level in almost six years and manufacturing in the Philadelphia region expanded, bolstering speculation the Federal Reserve will reduce stimulus. U.S. policy makers have said they will continue the bond-buying program until the labor market has improved “substantially.”
“Good jobless claims numbers are bad news for people that want stimulus to continue,” Matthew Kaufler, a portfolio manager at Federated Investors Inc. in Rochester, New York, said by phone. His firm oversees $363.8 billion. “It’s something the Fed clearly tracks, and it would give some impetus toward the side of tapering sooner rather than later.”
All 10 groups in the MSCI Emerging Markets Index slumped today, led by health-care and commodity companies. The broad measure dropped 9 percent this year, compared with a 13 percent surge in the MSCI World Index. The gauge of developing nations is trading at 10.1 times estimated earnings, below the valuation of developed markets of 13.7.
The iShares MSCI Emerging Markets Index exchange-traded fund retreated 1.2 percent to $39.64. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, surged 5.4 percent to 23.10.
Most Brazilian stocks fell as speculation that the government will raise fuel prices stoked concern that policy makers may speed up the pace of interest-rate increases even as economic growth falters. OGX tumbled after it said cash reserves plunged 72 percent in the second quarter.
The Micex Index lost 2.3 percent, the most among major developing-nation gauges, as Gazprom posted the biggest drop in two months. OAO Sberbank, Russia’s largest lender, dropped 2.5 percent. Benchmark gauges in Turkey (XU100), Hungary and the Czech republic retreated more than 1.1 percent.
China’s stocks fell, dragging the benchmark index down the most in two weeks, as drugmakers slid amid the start of a corruption probe. Jiangsu Hengrui Medicine Co. and Beijing SL Pharmaceutical Co. sank more than 5 percent. Regulators will crack down on illegal competition and bribery in drug sales and medical services, the official Xinhua News Agency reported.
Egypt’s benchmark government bonds slumped for a second day. The yield on the 5.75 percent notes maturing in April 2020 rose 22 basis points at 9:05 p.m. in Cairo to the highest on a closing basis since July 9.
The premium investors demand to own emerging-market debt over U.S. Treasuries slid 0.01 percentage point to 321 basis points, according to JPMorgan Chase & Co.
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