Emerging Market Shares Drop With Metals After China Data

Emerging-market stocks fell to a four-month low and industrial metals dropped as data showed China’s service industries weakened last month. U.S. shares erased gains in the last hour of trading.

The MSCI Emerging Markets Index lost 1.2 percent as of 4 p.m. in New York, extending its two-day slump to 2.4 percent, its worst drop since August. The Standard & Poor’s 500 Index was little changed after yesterday sliding the most in three weeks. Zinc, lead and aluminum lost at least 1.7 percent to lead commodities lower. Oil retreated 1.6 percent, capping the biggest weekly decline since June 2012. Ten-year Treasuries yielded 2.99 percent, near a two-and-a-half year high.

Economic data from China this week showed two measures of factory output declined while the non-manufacturing gauge fell to a four-month low in December. The U.S. is poised for faster growth amid a “combination of financial healing, greater balance in the housing market, less fiscal restraint, and, of course, continued monetary policy accommodation,” Federal Reserve Chairman Ben S. Bernanke said in prepared remarks for a speech in Philadelphia.

“It’s pretty well understood that China, because it’s been confronted with an inflationary spike, they’ve been needing to bring down the growth rate somewhat,” Kevin Caron, a Florham Park, New Jersey-based market strategist at Stifel Nicolaus & Co., which oversees $160 billion, said by phone. “That’s part of what’s feeding into the problems for emerging markets.”

Bond Buying

The Fed’s decision to maintain the pace of bond buying during 2013 helped the S&P 500 jump 30 percent last year. The S&P 500 finished the year at an all-time high for the first time since 1999. The Dow average climbed 27 percent in 2013 for its best performance since 1995. Fed officials said last month they will reduce their monthly purchases of assets to $75 billion from $85 billion starting this month, citing faster-than-estimated economic growth

Equity returns will slow this year, Wall Street strategists forecast. The S&P 500 will end 2014 at 1,950, according to the average of 20 estimates compiled by Bloomberg. That represents a 5.5 percent gain from the end of 2013.

Analysts estimate earnings for S&P 500 companies in the fourth quarter grew by 5.2 percent, according to data compiled by Bloomberg. Alcoa will unofficially begin the reporting season when it discloses results after the markets close on Jan. 9.

Gauges of financial and industrial shares rose at least 0.2 percent for the biggest gains among the 10 major industries in the S&P 500, while telephone, technology and utility shares had the biggest declines. JPMorgan Chase & Co., Johnson & Johnson and UnitedHealth Group Inc. rose more than 0.7 percent to lead gains in the Dow Jones Industrial Average.

Market Movers

General Motors Co. fell 3.3 percent after December sales missed estimates. FireEye Inc. soared 39 percent after acquiring Mandiant Corp. in a $1.05 billion deal that consolidates providers of services that protect computer networks against hackers and spies.

Delta Air Lines Inc. rose 5.5 percent for the biggest gain in the S&P 500 after the airline reported that consolidated passenger unit revenue rose 10 percent in December over the same month a year prior and it expects to report more than $1 billion in operating cash flow from last month.

Among European shares, Next Plc jumped 10 percent after the U.K.’s second-largest clothing retailer increased its profit forecast and said it planned to pay a special dividend. Remy Cointreau SA slipped 2.6 percent after Frederic Pflanz resigned as chief executive officer.

‘Good Surprise’

“Next is a good surprise for the market and the U.K. economy,” said Pierre Mouton, who helps oversee $6 billion as a portfolio manager at Notz, Stucki & Cie. in Geneva. “Otherwise, we are seeing a quiet start to the year. My gut feeling is, this year, we will see the market moving a lot around the pace of tapering in the U.S.”

About three shares fell for each that rose in the MSCI Emerging Markets Index, extending this week’s loss to 1.9 percent, the worst week in two months. The Hang Seng China Enterprises Index slid 2.6 percent today, while equity gauges in Shanghai, Seoul, Jakarta and Turkey declined more than 1 percent.

China’s non-manufacturing purchasing managers’ index fell to 54.6, the lowest since August, from 56 in November. Data on Jan. 1 showed the official gauge for factory output dropped more than economists projected to a four-month low. An HSBC Holdings Plc and Markit Economics Ltd. index of Chinese manufacturing published yesterday slipped to 50.5 from 50.8 in November, matching the median estimate in a Bloomberg survey.

Spain Yields

Spain’s 10-year yield fell 10 basis points to 3.87 percent, the least since May 2010. Unemployment declined 107,570 last month, according to Ministry of Labor in Madrid, the biggest decrease since June.

The additional yield investors demand to hold Spanish 10-year debt over similar-maturity German bunds dropped below 200 basis points for the first time since May 2011. The Italy-Germany spread also slipped below 200 basis points, for the first time since July 2011.

The rate on U.S. 10-year Treasuries held at 2.99 percent, after jumping to 3.05 percent yesterday, the most since July 2011. The yield on German 10-year bunds was little changed at 1.94 percent, while the rate on similar-maturity U.K. gilts was at 3.02 percent.

Copper dropped 1.1 percent to $7,315 a metric ton and zinc declined 2.4 percent to $2,026 a ton. Gold rose for a second day, rising 1.1 percent to $1,238.60 an ounce, posting the biggest weekly gain since October.

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