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Emerging-Market Slide Continues as Commodities Plunge


The selloff in emerging-market assets and commodities continued, sending currencies from Australia to Mexico lower and a measure of developing-nation stocks to a four-year low as Chinese shares slumped. Treasuries rose.

Thailand’s baht slid 0.5 percent to 35.566 per dollar by 8:15 a.m. in London, touching its weakest level since 2009 after a deadly bombing in Bangkok. Australia’s dollar weakened 0.3 percent and Russia’s ruble dropped 0.6 percent as a gauge of commodities fell to the lowest since 2002. The MSCI Emerging Markets Index dropped 0.8 percent, while Chinese shares tumbled the most in three weeks. U.S. equity-index futures fluctuated as the yield on 10-year Treasuries fell two basis points.

The blast that killed at least 20 people in the Thai capital adds to pressure on the baht as China’s devaluation of the yuan and the prospect of higher U.S. interest rates spur a retreat from emerging-market assets. Indonesian exports dropped 19 percent last month from a year ago, more than twice the decline predicted by economists. New-home prices rose in more Chinese cities in July, according to a statement on the statistics bureau’s website today, spurring speculation that the government’s room for further monetary easing may be limited.

“There’s a worrying combination of negative fundamentals and a looming Fed hike which is an echo of 1997 and 1998,” said Michael Every, head of financial markets research at Rabobank Group in Hong Kong. “The Bangkok bombing last night didn’t help sentiment. While most Asian countries and currencies are coming under downward pressure because of what the Fed’s doing, their own economies are so weak that they’re quite happy to allow the currencies to weaken.”

Foreigners Dead

The baht slipped as much as 0.8 percent to 35.648 per dollar Tuesday, its weakest intraday level since April 23, 2009. Then nation’s benchmark stock index is heading for its lowest close since May 2014. Erawan Group Pcl, named for the same Hindu god as the temple targeted in the blasts and which also operates the nearby Grand Hyatt hotel, plunged 9.2 percent.

A gauge tracking 20 of the most-traded developing-nation currencies on Friday capped its longest run of weekly declines since 2000 as the pullback in commodities hit the ringgit to the ruble and China’s devaluation fueled concern over the outlook for the world’s second-largest economy.

Malaysia’s ringgit, which has been battered by a political scandal and falling commodity prices, slipped 0.4 percent and is trading at levels last seen during the Asian financial crisis in 1998. It’s the worst-performing Asian currency the past month, sliding 7.7 percent in the month through Monday. That’s almost double the loss incurred by Taiwan’s dollar, the next-worst performer.

Indonesia’s rupiah weakened to 13,847 per dollar, a level not seen for 17 years. Turkey’s lira slipped 0.2 percent and the Mexican peso also retreated 0.2 percent.

Shanghai Composite

China’s currency weakened to as many as 6.4166 yuan per dollar in mainland trading. The People’s Bank of China has kept its reference rate for the yuan relatively stable since Friday after devaluing it by 4.4 percent in three days last week. Goldman Sachs Group Inc. has lowered its forecasts for the yuan amid reports policy makers will resort to more monetary easing.

The Shanghai Composite Index tumbled 6.2 percent. The Hang Seng China Enterprises Index dropped 1.5 percent, erasing a gain of as much as 1.3 percent, after its lowest close since Dec. 1.

The MSCI Emerging Markets Index fell to its lowest level since October 2011, with a global gauge of shares in emerging and developed markets retreating 0.2 percent.

Stoxx 600

Seventeen of the 19 groups on the Stoxx Europe 600 Index retreated Tuesday. RWE AG led declines, falling 2.2 percent after the German utility’s stock was downgraded to sell from hold at Societe Generale SA by equity analyst Lueder Schumacher.

The Bloomberg Commodity Index extended a 13-year low reached Monday, falling 0.3 percent in a sixth day of losses. That’s the longest streak since July 2014.

Copper dropped 0.7 percent, while nickel for three-month delivery on the London Metal Exchange weakened 1.4 percent. Lead and zinc also dropped more than 1 percent.

West Texas Intermediate crude is fetching its lowest price since 2009 after sinking 1.5 percent Monday, while Brent oil lost 0.6 percent to $48.43 in London.

Data due Wednesday from the U.S. government is projected to show the nation’s oil inventories held above 90 million barrels, exceeding the five-year average for this time of year.

(Source: Bloomberg)