Thursday, January 04, 2007

Emerging market shares tumble

Yesterday's story, that of weakness in copper & base metals affecting shares of metals producers, is followed by today's news of a continued drop in metals prices and a slump in emerging market shares.

Bloomberg reports:

Jan. 4 (Bloomberg) -- Emerging-market stocks tumbled, led by Poland's biggest copper miner and a Brazilian iron ore producer, as the prospect of slower global economic growth pushed down metals prices.

The Morgan Stanley Capital International Emerging Markets Index, which tracks 25 developing markets, fell 1.6 percent, the biggest decline since September. Stock indexes in Poland, Hungary, Brazil and India all lost more than 1 percent.

Economic reports today showed demand for services in the U.S. slowed and pending sales of existing homes declined, adding to evidence growth is cooling. Copper fell to an eight-month low in New York, while aluminum, lead and tin also declined. Shares of Poland's KGHM Polska Miedz SA, Europe's biggest copper miner, dropped 4.9 percent

``Many emerging markets are dependent on commodity stocks,'' said Michal Bartek, who helps oversee $11 billion in global equities at New Star Asset Management Ltd. in London.

``Industries that are exposed to raw materials will be hit'' by price slumps.


Short term reality check in the wake of last year's gains or the beginning of something else altogether? We'll be watching.