Emerging-market stocks dropped the most in more than a week after data signaled China’s manufacturing in June may contract for an eighth month and the U.S. Federal Reserve cut economic growth estimates.
The MSCI Emerging Markets Index (MXEF) slid 0.9 percent to 939.82 at 1:12 p.m. in London, the biggest intraday fall since June 12. The Shanghai Composite Index (SHCOMP) slumped 1.4 percent to the lowest level since March 29. The WIG20 Index (WIG20) retreated 0.4 percent in Warsaw and the FTSE/JSE Africa All Share Index (JALSH) slumped 0.2 percent in Johannesburg as metals prices slid. Indian shares jumped 0.8 percent as JPMorgan Chase & Co. upgraded the nation’s equities.
A preliminary reading for a purchasing managers’ index from HSBC Holdings Plc and Markit Economics showed China’s manufacturing may shrink this month. Euro-area services and manufacturing output contracted for a fifth month in June, suggesting the economy may fail to grow in the current quarter. Fed officials cut their estimate for U.S. growth in 2012 to between 1.9 percent and 2.4 percent, and extended its Operation Twist program.
“The Fed just did the bare minimum with simply an extension of the operation twist, as opposed to a full-fledged round of quantitative easing. This will be perceived as short- term negative for risky assets, including global emerging markets,” Esther Law, a London-based director of emerging- markets strategy at Societe Generale SA, said in an e-mail. “Conditions of China’s manufacturing sector, especially the small- and medium-sized factories, continued to slip.”
European Slowdown
The Fed’s new forecast range for U.S. growth compares with an April forecast of 2.4 percent to 2.9 percent. The 48.1 preliminary reading for Chinese PMI compares with a final 48.4 for May. A reading above 50 indicates expansion. If confirmed on July 2, it would equal the run of below-50 readings from August 2008 to March 2009.
A composite index based on a survey of purchasing managers in both manufacturing and services industries in the 17-nation euro area was stable at 46, the same reading as in May, Markit said.
The ruble depreciated 1 percent as oil futures in New York slid as much as 1.9 percent in electronic trading to $79.92 a barrel, the lowest price since Oct. 4.
Forint Strengthens
The forint strengthened 0.3 percent against the euro as Hungary’s government submitted amendments to a disputed central bank law to unfreeze international bailout negotiations blocked for seven months.
The ISE National 100 Index (XU100) gained 1.9 percent in Turkey, whose sovereign debt was upgraded to one level below investment grade by Moody’s Investors Service yesterday. Turkiye Garanti Bankasi AS, the country’s biggest listed lender, jumped 3 percent.
The country left its so-called interest rate corridor unchanged as it seeks to support the lira and slow inflation. The lira weakened less than 0.1 percent against the dollar.
The Micex Index gained 0.3 percent in Moscow, after having earlier fallen as much as 0.8 percent.
The Hang Seng China Enterprises Index (HSCEI) of Chinese companies listed in Hong Kong slid 1.6 percent, the steepest decline in more than two weeks. Lenovo Group Ltd. (992), the world’s second- biggest maker of personal computers, tumbled 9.4 percent, the most since February 2010, after China Times said the company lowered its guidance for shipment growth this year.
Dongyue Group (189) plunged 15 percent after the Chinese chemical maker said its profit for the six months ending June 30 may decrease as the global economic slowdown cut demand for its products.
Greek Review
South Korean’s Kospi Index and Taiwan’s Taiex Index sank 0.8 percent as the two nations failed to win an upgrade to developed market status from MSCI Inc.
Greece’s stock market was put under review for reclassification to emerging markets by MSCI, a change that would make the European Union nation the first advanced country to be cut to developing status. Qatar and the United Arab Emirates will keep their frontier classification, MSCI said in a statement yesterday.
The MSCI Greece Index rose 0.3 percent.
India’s Sensex (SENSEX) rallied after JPMorgan raised Indian equities to overweight from neutral.
Russia’s dollar bond due in 2022 was little changed, with the yield one basis point higher at 3.97 percent. Turkey’s 2022 bond rose, cutting the yield seven basis points to 4.62 percent.
The extra yield investors demand to own emerging-market debt over U.S. Treasuries fell three basis points, or 0.03 percentage point, to 377, according to JPMorgan Chase & Co.’s EMBI Global Index.
The Markit iTraxx SovX CEEMEA Index of eastern European, Middle East and Africa credit-default swaps eased two basis points to 293.
To contact the reporters on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net; Jason Webb in London at jwebb25@bloomberg.net.
To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net.
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