March 1 (Bloomberg) -- Emerging-market stocks erased this week’s gains, led by commodity producers, after Chinese manufacturing data trailed estimates and as $85 billion of spending cuts were set to be triggered in the U.S.
Vale SA, the world’s biggest iron-ore producer, was the biggest drag in a measure of developing-nation shares. OAO Gazprom, Russia’s largest natural-gas company, fell the most in two weeks. Bank of China Ltd. sank 2.5 percent in Hong Kong. Energy Development Corp. tumbled 11 percent as five people were killed and six are missing after a landslide in the Philippines. Stocks pared losses after a report showed American factories expanded at the fastest pace in almost two years.
The MSCI Emerging Markets Index slid 0.1 percent to 1,053.13 in New York, dropping less than 0.1 percent for the week. China’s official Purchasing Managers’ Index fell to the weakest level in five months in February. The U.S. Senate rejected a pair of partisan proposals to replace spending reductions. The euro-area unemployment rose to a record.
“The softer data out of China reflects the recession we’re seeing in the euro zone, which is being intensified by the increase in taxes and the sequester due to start today,” Alan Gayle, senior strategist at RidgeWorth Capital Management, said in a phone interview from Atlanta. His firm oversees about $48 billion, including developing-nation shares. “The sluggishness is weighing on demand in emerging markets.”
Today’s decline in equities added to a 1.4 percent slump last month, the biggest decline since May. The emerging-markets gauge has declined 0.2 percent this year, compared with a gain of 4.7 percent of the MSCI World Index of developed-country stocks. The measure of developing nations trades at 10.6 times estimated 12-month earnings, compared with the MSCI World’s 13.8 times, according to data compiled by Bloomberg.
The iShares MSCI Emerging Markets Index exchange-traded fund rose 0.2 percent to $43.31. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a gauge of options prices on the fund and expectations of price swings, rose 1.6 percent to 18.72.
Measures of raw material and energy producers had the biggest declines in the MSCI Emerging Markets Index, dropping at least 0.6 percent.
The Standard & Poor’s GSCI measure of raw materials declined a fourth straight day. Oil fell to the lowest level this year in New York. Vale slid 3.6 percent. Gazprom slumped 2.1 percent.
Russia’s Micex Index slipped 0.8 percent, dropping a second day. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong slid 0.8 percent.
“Weaker commodity prices are undermining a large percentage of the market capitalization,” Julian Rimmer, who trades developing-nations’ stocks at CF Global Trading in London, wrote in e-mail. “Chinese data confirmed sluggish growth” while fund outflows make for a “less-than-constructive backdrop,” he said.
Asia funds lost $185 million, snapping a 24-week inflow streak, Markus Rosgen and Yue Hin Pong, analysts at Citigroup Inc., wrote in a report today, citing EPFR figures.
The Bovespa index slid 0.9 percent in Sao Paulo. Brazil’s economy expanded less than analysts forecast for the fourth straight quarter, as the government struggles to rebuild investor confidence in the second-biggest emerging market.
The Bloomberg China-US Equity Index of the most-traded Chinese dropped for a fourth week. Youku Tudou Inc., China’s biggest web video operator, slid 1.7 percent to an almost two- month low in U.S. hours as sales came below estimates.
Bank of China fell 2.5 percent in Hong Kong. China Mobile Ltd. dropped 1.1 percent. Cnooc Ltd., a state-owned Chinese offshore energy explorer, sank 2.4 percent after Nomura Holdings Inc. cut its recommendation to reduce from neutral.
Energy Development tumbled 11 percent. Two weeks of intermittent rain triggered the landslide this morning at Energy Development’s Upper Mahiao geothermal project, the company said today. A search is on for the missing workers, who were employed by contractor First Balfour Inc., it said.
India’s S&P BSE Sensex Index rose 0.3 percent as data yesterday showed slower-than-estimated economic growth, giving the central bank more scope to cut interest rates. Indonesia’s PT Bank Central Asia slumped 2.7 percent after the nation’s consumer prices accelerated to a 20-month high in February.
Merida Industry Co., a Taiwanese bicycle maker, increased 6.9 percent to an all-time high after Apple Daily reported that more than 6,000 overseas buyers, a record number, are expected at the Taipei Cycle Show that starts on March 20.
Old Mutual Plc, Africa’s biggest insurer, jumped 3.8 percent to the highest in more than five years in Johannesburg. The company set aside 5 billion rand ($550 million) for acquisitions in fast-growing countries on the continent after full-year profit beat analysts’ estimates. South Africa’s FTSE/JSE Africa All-Share Index climbed 1.1 percent.
The extra yield investors demand to hold emerging-market debt over U.S. Treasuries rose two basis points, or 0.02 percentage point, to 290, according to the JPMorgan Chase & Co.’s EMBI Global Index.
--With assistance from Harry Suhartono in Jakarta, Alex Nicholson in Moscow and Gan Yen Kuan in Kuala Lumpur. Editors: Stephen Kirkland, Rita Nazareth