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Kuala Lumpur - Emerging-market stocks fell for a sixth day, the longest losing streak since December, on concern a U.S. jobs report will add to evidence the world’s biggest economy is strong enough to justify higher interest rates.
Developing-nation currencies headed for their biggest five-day drop in four months as comments from Federal Reserve officials this week that the central bank may act as soon as June boosted the dollar.
China’s Shanghai Composite Index slid the most since February as commodity prices weighed on raw-material producers, while shares in the Czech Republic and Turkey opened lower. Hong Kong-listed China stocks have fallen 5.1% this week, while the rand and Turkey’s lira slid at least 4.5%.
“Risk appetite has taken a turn south this week with equities heading lower,” said Vishnu Varathan, a Singapore-based economist at Mizuho Bank. “A stronger dollar has not helped either. Despite softer incoming data, the Fed has not ruled out rate hikes this year so dollar bears have had to take a break this week.”
Emerging-market assets are having a miserable start to May as a rally from January to April starts to unwind.
The Fed is on course to add to its December rate increase this year, with St. Louis chief James Bullard, San Francisco’s John Williams, Robert Kaplan of Dallas and Atlanta’s Dennis Lockhart all stressing in separate remarks Thursday that policy would be data dependent and the Fed’s June 14 to June 15 meeting was on the table.
The MSCI Emerging Markets Index of shares slid 0.8% as of 09:42, extending this week’s loss to 4.4%, the most since the period ended January 8. All 10 industry groups declined, led by energy and telecommunications shares.
The Shanghai Composite Index slid 2.8%, the biggest decline since February 29, as concern grew that a pickup in economic indicators is faltering. The Hang Seng China Enterprises Index, which tracks Hong Kong-listed China companies, fell 1.6%, extending a slide that began after Chinese manufacturing data released in the past week missed economists’ forecasts.
‘Weak side’
“Some macro data this week has raised doubts over the sustainability of economic rebound, which is causing the market to pull back,” said Linus Yip, a strategist at First Shanghai Securities in Hong Kong. “The market is on a weak side and gripped in a correction. It seems to be some stimulus needed for the market to stage a rebound.”
Benchmark equity indexes dropped 1% in the Czech Republic and 0.3% in Turkey.
The MSCI Emerging Markets Currency Index dropped 0.3%, increasing this week’s decline to 1.7%, also the most since January 8. The rand has fallen 5.4% this week and lira dropped 4.6%.
Turkey’s currency has weakened on four of the past five days as Prime Minister Ahmet Davutoglu stepped down as leader of the ruling party, ending a struggle over President Recep Tayyip Erdogan’s quest for greater powers.
The Philippines Stock Exchange Index fell as much as 0.5% to a two-month low before a presidential election on Monday, which opinion polls indicate will be won by Davao City mayor Rodrigo Duterte. The peso strengthened 0.2%, trimming its decline this week to 0.6%.
There’s a 10% chance the Fed will raise its benchmark rate in June and 49 percent odds by year-end, according to data compiled by Bloomberg based on fed fund futures. The calculations assume the effective fed funds rate will average 0.625% after the next increase. Economists predict US payrolls rose by 200 000 last month, a Bloomberg survey showed before Friday’s report.
