BLBG: Emerging Market Stocks Decline on Rating Concern; Yen Advances
By Stuart Wallace
Dec. 8 (Bloomberg) -- Emerging-market stocks fell, with the MSCI’s gauge of developing nations’ equities posting its longest losing streak in five weeks, as rating companies highlighted the risk of government deficits. Dubai led the drop, retreating to the lowest level in almost five months. The yen rose.
The MSCI Emerging Markets Index lost 0.4 percent at 11:34 a.m. in London, Dubai’s DFM General Index plunged 6.1 percent and Abu Dhabi’s index slumped 3.4 percent. The yen rose against all 16 most-traded currencies. Futures on the Standard & Poor’s 500 Index fell 0.3 percent. Europe’s Dow Jones Stoxx 600 Index declined 0.8 percent.
Moody’s Investors Service said today deteriorating public finances in the U.S. and U.K. may “test the Aaa boundaries.” Standard & Poor’s said it may cut Greece’s rating for a second time this year. U.S. Federal Reserve Chairman Ben Bernanke told the Washington Economic Club yesterday that the U.S. economy faces “formidable headwinds,” while Japan’s government backed a stimulus package worth 7.2 trillion yen ($81 billion).
“Central banks and governments around the world are totally right in saying that the recovery is still very weak,” Philippe Gijsels, a senior structured product strategist at Fortis Global Markets in Brussels, said in an interview with Bloomberg Television. “Going into 2010 I would be extremely surprised if we do not see a serious hiccup somewhere.”
Greece, Ireland, Portugal
The MSCI World Index of 23 developed nations’ stocks was little changed, after earlier losing 0.2 percent. The Dow Jones Stoxx 600 Index fell as benchmark indexes in Greece, Ireland, Portugal and Iceland declined. Tesco Plc retreated 2.2 percent in London after reporting slowing sales growth that missed analysts’ estimates.
German industrial output unexpectedly fell for the first time in three months in October, shrinking 1.8 percent, the Economy Ministry said today.
The MSCI Asia Pacific Index gained 0.3 percent. Nintendo Co., the world’s biggest game maker, gained 1.4 percent in Tokyo after a market researcher said the company posted record sales of its new Super Mario Bros. title. Canon Inc., which gets 28 percent of its revenue from the Americas, declined 1.1 percent. Tokyo Tatemono Co. tumbled 7 percent after shareholders cut their stakes in the developer.
Turkish stocks climbed to a six-week high, with the benchmark ISE National 100 Index added 1.7 percent.
U.S. futures slipped 0.2 percent, after earlier advancing as much as 0.3 percent. The S&P 500 yesterday lost 0.3 percent. FedEx Corp. said late yesterday its earnings will be $1.10 a share for the period ended in November. The stock climbed 3.3 percent in German trading.
Dubai Slumps
The benchmark gauge for U.S. equities has surged 63 percent since March 9, the steepest advance since the Great Depression, spurred by record-low interest rates and $12 trillion committed by governments worldwide. The measure is valued at 22.2 times the reported operating earnings at its companies from the past year, the most expensive level since 2002, according to data compiled by Bloomberg.
Dubai shares fell the most among benchmark indexes tracked by Bloomberg, extending a 22 percent slide since the government said on Nov. 25 that it was seeking a “standstill” agreement on Dubai World’s debt. The company last week began talks with banks to restructure $26 billion of debt, including a $3.52 billion Islamic bond of property unit Nakheel PJSC due to be repaid on Dec. 14.
Nakheel had a first-half loss of 13.4 billion dirhams ($3.65 billion), compared with year-earlier profit of 2.65 billion dirhams, according to a document obtained by Bloomberg News. Moody’s cut the credit ratings for the six Dubai government related issuers it rates.
Ruble Weakens
The ruble weakened 1.2 percent against the dollar, extending its steepest three-day slump in five months, after Finance Minister Alexei Kudrin said Russia remained a “weak link” in global finance. South Africa’s rand traded 0.8 percent weaker.
The yen strengthened 1.1 percent against the dollar to 88.56 and 1.2 percent to 131.12 per euro. The dollar dropped 0.2 percent against the euro. Japan’s currency gained the most against the pound, adding 1.9 percent to 144.43, after Moody’s said the U.K. faces an “inexorable deterioration of debt affordability.” The pound fell 0.7 percent against the euro and 0.8 percent versus the dollar.
Bernanke reaffirmed the Fed’s intention to keep interest rates low for an “extended period.” Japan said its stimulus package will help counter “a deterioration in employment conditions” and “sluggish demand because of deflationary pressure.”
Greek Bonds Tumble
Greek bonds tumbled, pushing the yield on the 10-year note up 11 basis points to 5.24 percent. The difference in yield with German bunds widened to 206 basis points, the most since May 4. S&P yesterday placed Greece’s A- sovereign credit rating on watch for a possible downgrade, while European Central Bank President Jean-Claude Trichet said Greece is facing a “very difficult” situation and needs to take “courageous” decisions to counter the budget deficit.
Copper led gains in industrial metals, advancing 1.1 percent to $7,076.50 a metric ton in London. Aluminum rose 1.1 percent and zinc 1.7 percent. Crude oil fell 0.1 percent to $73.83 a barrel in New York trading. Gold for immediate delivery rose 0.2 percent to $1,160.57 an ounce in London.
The Bank of Korea said today that there’s “an illusion in gold,” and that adding to gold holdings isn’t attractive as most other central banks aren’t buying and the metal offers no cash returns.
To contact the reporter on this story: Stuart Wallace in London at swallace6@bloomberg.net
