Emerging Markets Drop as Oil Price Drives Currencies Lower

Emerging-market stocks declined, with the benchmark index set for a 10-month low, as the ruble slid beyond 60 against the dollar for the first time ever and Indonesia’s rupiah sank to the weakest level in 16 years.

PTT Pcl, a Bangkok-based oil company, slumped 4.9 percent, dragging Thailand’s stock gauge down the most since January. China Mobile Ltd. fell to a seven-week low in Hong Kong. The Ibovespa slid 3.1 percent as a report signaled that Brazil’s economy unexpectedly contracted in October. The ruble plunged to 63.5 per dollar before Russia’s central bank holds a long-term auction to provide rubles to banks. Indonesia’s rupiah depreciated 2 percent. A Bloomberg gauge tracking 20 developing-economy currencies declined 1.3 percent.

The MSCI Emerging Markets Index lost 1.6 percent to 923.58 at 11:24 a.m. in New York. Crude dropped to a five-year low after the United Arab Emirates said OPEC will refrain from cutting output even if prices slumped to as low as $40. Federal Reserve policy makers meet this week to review their stance on the timeframe for a U.S. interest-rate increase.

“The plummeting oil prices have been one of the more surprising economic developments in 2014,” Ruth Lea, economic adviser at Arbuthnot Banking Group Plc in London, said by e-mail. “Moreover, prices should remain weak into 2015. Of course, there are losers including the oil companies and net oil-exporters.”

All 10 industry groups in the MSCI Emerging Markets Index fell, led by energy companies. The premium investors demand to hold emerging-market debt over U.S. Treasuries increased six basis points to 389 basis points, according to JPMorgan Chase & Co.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza