Emerging Stocks Fall as Vale Leads Commodity Shares Lower

Emerging-market stocks fell, almost erasing a monthly gain, after weaker-than-estimated earnings at Vale SA spurred a slide in commodity producers. Russia’s ruble slumped on concern tension in Ukraine will escalate.

The MSCI Emerging Markets Index retreated 0.5 percent to 995.28. Vale, the world’s largest iron-ore producer, extended a four-day decline in Sao Paulo to 6.2 percent after saying that profit sank as it sold the steel ingredient 25 percent cheaper than a market reference price. The ruble dropped for the first time in three days as President Vladimir Putin said he may retaliate against further sanctions on Russian companies.

Mounting concern that economic growth is slowing in China, Vale’s biggest buyer, is pushing down iron-ore prices and holding the miner’s shares close to a five-year low. U.S. stocks fluctuated after the Federal Reserve pared its monthly bond-buying program and said the economy is gaining momentum.

“You’re seeing some large multinationals warn how China’s slowing growth is impacting their business,” Sean Lynch, the Omaha, Nebraska-based global investment strategist at Wells Fargo Private Bank, which oversees about $170 billion, said by phone. “We’re still a little bit cautious on commodities until we get a firm grip on where China’s growth settles in. The Fed tapering is on autopilot. It’s going to continue, and the markets seem to be anticipating that as well.”

Brazil’s Ibovespa trimmed its monthly gain to 2.4 percent as Vale tumbled to a six-week low. Brewer Ambev SA sank after Brazil said it will raise taxes on beer and soft drinks. Anhanguera Educacional Participacoes SA rallied after the education company reported preliminary results that showed an increase in profit.

Ruble, Micex

The ruble depreciated 0.4 percent to 41.9089 against the central bank’s target basket of dollars and euros by 6 p.m. in Moscow, extending its loss this month to 2 percent. The Micex Index added less than 0.1 percent, capping a 4.6 percent retreat in April. The yield on ruble-denominated sovereign debt due in February 2027 dropped seven basis points to 9.47 percent, an increase of 58 basis points in the period.

Putin said yesterday more sanctions would set the stage for increasing economic warfare that may be painful for the U.S. and European companies. About 20 gunmen seized government buildings at Horlivka in Ukraine today, a day after storming premises belonging to the police in Luhansk. The International Monetary Fund cut Russia’s growth forecast for 2014.

The Borsa Istanbul 100 Index rallied 2.2 percent, led by Akbank TAS and Turkiye Garanti Bankasi AS. Turkey’s central bank Governor Erdem Basci said policy makers could cut key interest rates if a recent decline in the country’s risk premium holds.

Tencent Holdings

China’s stocks capped a second consecutive monthly loss amid concern a flood of new shares will divert funds from existing equities and slowing economic growth will dent earnings. Tencent Holdings Ltd. sank to a four-month low in Hong Kong. The yuan dropped for a fourth month in its longest losing streak in at least seven years, on concern a slowdown in Asia’s largest economy has deepened and as the central bank lowered the currency’s daily fixing.

The iShares MSCI Emerging Markets Index ETF dropped 0.2 percent to $41.33. The premium investors demand to own emerging-market debt over U.S. Treasuries rose 0.02 percentage point to 293 basis points, according to JPMorgan Chase & Co.

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