Emerging stocks pare weekly gain as commodity producers decline

Global markets respond to U.S. growth report

Emerging-market stocks fell, paring a weekly advance in the benchmark index, as declines in commodity producers overshadowed gains in Chinese banks.

OAO Rosneft, Russia’s biggest oil producer, slid to a one-week low after crude retreated. Bank of Communications Co. rose to a two-month high in Hong Kong after the Chinese lender reported earnings that beat analysts’ estimates. The rand weakened for the first time in four days after South Africa’s central bank said more borrowing and higher inflation risked sending yields higher. Brazil’s benchmark equity gauge slipped 0.4% in early trading.

The MSCI Emerging Markets Index lost 0.2% to 1,024.9 as of 2:05 p.m. in London. The gauge has climbed 1.4% this week, poised for the largest increase since March 29. Oil dropped from a two-week high as the Standard & Poor’s GSCI index of 24 commodities pared its biggest weekly advance since February. More than 54% of companies in the MSCI index that posted quarterly profits this month have trailed analyst estimates, data compiled by Bloomberg show.

“Stocks are volatile amid the fluctuation in commodity prices,” Aneesh Srivastava, who manages about $514 million as chief investment officer at IDBI Federal Life Insurance Co., said by phone in Mumbai. “Quarterly earnings are marginally below street expectations but there are some bright spots.”

The U.S. economy grew 2.5% in the first quarter, less than the 3% forecast in a Bloomberg survey, after a 0.4% fourth-quarter advance, Commerce Department data showed today.

Gauges of energy and materials producers dropped at least 0.6% and were the biggest drag on the MSCI Emerging Markets Index, accounting for 58% of the index-point decline. Oil fell 0.4% in New York and copper slid 1.1% in London.

Yield Spreads

The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose three basis points, or 0.03 percentage point, to 286 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.

Rosneft dropped 1.2% in Moscow. United Co. Rusal, the world’s largest aluminum producer, slid 2%.

EON Russia, a unit of Germany’s largest utility and Federal Grid Co. fell at least 2.8%. The Economy Ministry is seeking a 6% increase in power tariffs for grid companies for 2014-2015 compared with 9% to 10% planned earlier, Interfax reported yesterday.

Metro Ticari & Mali Yatirimlar Holding AS, a Turkish group active in transportation and meat processing, fell 4.4% after shareholder Metro Altin sold 1.52 million shares, corresponding to 0.5% of the amount outstanding, according to a statement after the market closed yesterday.

Rand Weakens

The rand declined 0.3% against the dollar. Rising prices fueled by rand weakness and the need to finance a widening budget deficit may weigh on government debt, the South African Reserve Bank said in its Financial Stability Review yesterday.

The forint weakened 0.4% per euro, heading for a second week of declines after Hungary’s unemployment climbed more than forecast, boosting speculation the central bank will step up efforts to stimulate the economy.

The MSCI Emerging Markets Index has lost 2.8% this year, compared with a 8.9% increase in the MSCI World Index of developed stocks. The emerging-markets measure trades at 10.3 times 12-month projected profit, compared with the MSCI World’s 13.6 times, according to data compiled by Bloomberg.

South Korea’s Kospi index fell 0.4%. India’s S&P BSE Sensex slid for the first time in five days, losing 0.6%. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong rose 0.6%. The Philippine Stock Exchange Index added 0.4%, its second day of gains.

Trading Volume

Trading volumes for the FTSE Bursa Malaysia KLCI Index were 28% above the 30-day average, according to data compiled by Bloomberg. Volumes for the Shanghai Composite were 16% lower than the average.

Bank of Communications, China’s fifth-largest lender, rose 0.8% and Bank of China Ltd. added 1.4% in Hong Kong after posting record quarterly profits as they boosted income from loans and fee-based services.

Largan Precision Co., which makes camera lenses, jumped 7% after first-quarter earnings beat estimates and HSBC Holdings Plc and Credit Suisse Group AG upgraded the stock.

BYD Co., the Chinese automaker partially owned by Warren Buffett’s Berkshire Hathaway Inc., soared 12% in Hong Kong after saying first-half profit may surge 31-fold as losses for its solar unit narrow.

Posco, Asia’s third-biggest steelmaker by output, sank 2% in Seoul, after it reported a worse-than-estimated quarterly profit.

Yanzhou Coal Mining Co. slumped 6.2% in Hong Kong, the second-biggest decline in the MSCI Emerging Markets Index, after its first-quarter profit tumbled 78% from a year earlier.

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