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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