Emerging-market stocks erased this week's gains, led by commodity producers, after Chinese manufacturing data trailed estimates and as $85 billion of spending cuts were set to be triggered in the U.S.
Vale SA, the world's biggest iron-ore producer, was the biggest drag in a measure of developing-nation shares. OAO Gazprom, Russia's largest natural-gas company, fell the most in two weeks. Bank of China Ltd. sank 2.5 percent in Hong Kong. Energy Development Corp. tumbled 11 percent as five people were killed and six are missing after a landslide in the Philippines. Stocks pared losses after a report showed American factories expanded at the fastest pace in almost two years.
The MSCI Emerging Markets Index slid 0.1 percent to 1,053.13 in New York, dropping less than 0.1 percent for the week. China's official Purchasing Managers' Index fell to the weakest level in five months in February. The U.S. Senate rejected a pair of partisan proposals to replace spending reductions. The euro-area unemployment rose to a record.
“The softer data out of China reflects the recession we're seeing in the euro zone, which is being intensified by the increase in taxes and the sequester due to start today,” Alan Gayle, senior strategist at RidgeWorth Capital Management, said in a phone interview from Atlanta. His firm oversees about $48 billion, including developing-nation shares. “The sluggishness is weighing on demand in emerging markets.”
Today's decline in equities added to a 1.4 percent slump last month, the biggest decline since May. The emerging-markets gauge has declined 0.2 percent this year, compared with a gain of 4.7 percent of the MSCI World Index (MXWO) of developed-country stocks. The measure of developing nations trades at 10.6 times estimated 12-month earnings, compared with the MSCI World's 13.8 times, according to data compiled by Bloomberg.
The iShares MSCI Emerging Markets Index exchange-traded fund rose 0.2 percent to $43.31. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a gauge of options prices on the fund and expectations of price swings, rose 1.6 percent to 18.72.
Measures of raw material and energy producers had the biggest declines in the MSCI Emerging Markets Index, dropping at least 0.6 percent.
The Standard & Poor's GSCI measure of raw materials declined a fourth straight day. Oil fell to the lowest level this year in New York. Vale slid 3.6 percent. Gazprom slumped 2.1 percent.