Emerging-Market Stocks Fall on EU Sanction Threat as Ruble Sinks

Apr 14, 2014 4:49 pm ET

April 14 (Bloomberg) -- Emerging-market stocks fell, stemming a four-week advance, as the European Union weighed expanding sanctions against Russia amid mounting tension in Ukraine. The ruble led declines among major currencies.

The MSCI Emerging Markets Index retreated 0.4 percent to 1,011.73. Russia’s Micex index decreased to the lowest level in two weeks while the ruble extended this year’s slide to 8.5 percent. Ukraine’s hryvnia reversed earlier losses after the central bank raised its benchmark discount rate to support the currency. Yuan forwards declined to the lowest level in eight months amid concern China’s economic growth is faltering.

EU foreign ministers said today the bloc should be prepared to impose a third round of sanctions, including economic measures, as armed separatists in eastern Ukraine ignored a deadline to free official buildings they’ve occupied. Russian Foreign Minister Sergei Lavrov denied his nation is involved. The U.S. is prepared to step up sanctions on Russia over its incursion into Ukraine, Treasury Secretary Jacob J. Lew said.

“The Ukraine crisis is clearly an issue,” Derek Sasveld, a New York-based senior portfolio manager for ING Investment Management U.S., which oversees $180 billion, said in a phone interview. “Investors weigh the probability that an aggressive behavior by Russia can be mirrored by other countries.”

The iShares MSCI Emerging Markets Index ETF dropped 0.2 percent to $41.74. The premium investors demand to own emerging- market debt over U.S. Treasuries fell 0.01 percentage point to 294 basis points, according to JPMorgan Chase & Co.

Brazil, Russia

Brazil’s Ibovespa fell for the fourth time in five days as Even Construtora e Incorporadora SA led homebuilders lower. The real climbed on speculation Brazil’s interest rates will attract international investors to the nation’s financial assets.

The Micex Index retreated 1.3 percent in Moscow, while the ruble weakened 0.9 percent against the dollar. The hryvnia trade little changed against the dollar after the central bank in Kiev raised the rate to 9.5 percent from 6.5 percent, according to a statement on its website.

China’s benchmark stock index extended the biggest five-day rally in eight weeks as Chongqing Changan Automobile Co. led gains for consumer-discretionary shares and China Petroleum and Chemical Corp. rose. Banks fell. Twelve-month non-deliverable forwards fell 0.18 percent to 6.2480 per dollar as of 4:42 p.m. in Hong Kong, the weakest level since Aug. 23, according to data compiled by Bloomberg.

The Egyptian pound weakened to the lowest level in more than seven months after the central bank cleared a backlog of cash owed to equity investors abroad, reducing the availability of foreign currency.