Emerging Stocks Fall to Four-Month Low on Greece, China Concern (Update 1)
Emerging-market stocks fell to a four-month low on concern Greece will exit the single European currency and amid speculation China’s cut in banks’ reserve requirements will be insufficient to stem an economic slowdown.
The MSCI Emerging Markets Index (MXEF) dropped 1.2 percent to 958.75 as of 12:34 p.m. in London, the lowest since Jan. 17. Banks led declines among emerging-market stocks, with OAO Sberbank, the largest Russian lender, retreating 2.2 percent. OAO Gazprom, the world’s biggest natural gas exporter, slid 2.8 percent in Moscow as oil fell below $94 a barrel in New York for the first time since December.
Greece’s political deadlock looked set to continue for a second week as President Karolos Papoulias failed to secure agreement on a unity government. The People’s Bank of China announced on May 12 it is cutting the amount of cash that banks must set aside as reserves for a third time since November, pumping money into the financial system to support lending. Reserve ratios will fall 50 basis points, effective May 18.
“The outlook for global emerging markets continues to be quite challenging, with the deterioration of the backdrop in Europe,” Benoit Anne, head of emerging-markets strategy at Societe Generale SA in London, wrote in an e-mail to clients.