Emerging-Market Stocks Fall on China Data as Yuan Tumbles
Emerging-market stocks fell for a third day after a Chinese manufacturing gauge signaled contraction and concern grew that the crisis in Ukraine will escalate. The yuan touched the weakest level in 16 months.
The MSCI Emerging Markets Index dropped 0.4 percent to 1,004.76 at 3:33 p.m. in New York. The Shanghai Composite Index (SHCOMP) slipped for the fourth time in five days while the yuan extended this year’s slide to 2.9 percent, the biggest in Asia. Vale SA (VALE), which ships half of its ore and pellets to China, led losses in Brazil’s Ibovespa. (IBOV) The Micex Index slumped as Ukraine considered resuming operations to oust militants from eastern cities.
China’s preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics rose to 48.3 in April, matching economists’ estimates, while remaining below the expansion-contraction dividing line of 50. Russia scrapped bond sales for the seventh time in eight weeks as investors demanded higher yields after the U.S. said the country wasn’t taking steps to de-escalate the crisis in Ukraine.
“China’s growth is likely to be modestly slower,” Bill Adams, a senior international economist at PNC Financial Services Group in Pittsburgh, which oversees $127 billion in assets, said by phone. “Ukraine remains a major risk. We just have to watch to see how it develops.”
The Shanghai Composite Index extended this year’s slide to 2.3 percent as China Citic Bank Corp. and Huaxia Bank Co. tumbled. The yuan closed little changed at 6.2376 per dollar in Shanghai, China Foreign Exchange Trading System prices show. It fell as much as 0.15 percent to 6.2466 earlier today, the weakest level since Dec. 14, 2012.
Russian gas export monopoly OAO Gazprom led losses in the Micex. Foreign Minister Sergei Lavrov said his country is prepared to retaliate if its “legitimate interests” are “attacked directly,” drawing a parallel with actions during a 2008 war over the Georgian breakaway region of South Ossetia.
The Finance Ministry canceled the sale of as much as 10 billion rubles ($280 million) of nine-year ruble securities and the same amount of five-year notes because there were no bids at acceptable prices, according to a statement on its website.
The Ibovespa declined for a second consecutive day as commodities dropped amid concern about a slowdown in China, the biggest trading partner of Brazil. Iron-ore producer Vale fell to its lowest level in a month.
The iShares MSCI Emerging Markets Index ETF dropped 0.8 percent to $41.33. The premium investors demand to own emerging-market debt over U.S. Treasuries rose 0.03 percentage point to 293 basis points, according to JPMorgan Chase & Co.