(Bloomberg) -- Most emerging-market stocks dropped, led by industrial companies, as concern grew that American lawmakers will fail to reach a budget deal. Gold shares rallied as a dollar slump boosted the appeal of the precious metal.
The MSCI Emerging Markets Index fell less than 0.1% to 1,012.32 as 419 stocks retreated, while 328 advanced. The Philippine Stock Exchange Index led losses among the 94 global equity gauges tracked by Bloomberg amid inflation concern. Brazil’s Ibovespa snapped a three-day rally as industrial output in China, its top trading partner, trailed economists’ estimates. AngloGold Ashanti Ltd. surged 6.9 percent in Johannesburg as the precious metal rose the most in seven weeks.
Stocks joined a drop in U.S. equities on bets a budget deal could fall apart amid opposition from Republicans who don’t trust plans for future savings and Democrats who say it punishes federal workers by requiring they contribute more to pension plans. An agreement would mark a reprieve in three years of fiscal standoffs and, if Congress passes it, would stave off the risk of another government shutdown for at least a year or two.
“You would think failure to reach a deal is largely priced in because that’s what most people expect from politicians, but the question is whether they will also shut down the government or extend the debt ceiling,” Bruce McCain, who helps oversee more than $25 billion as chief investment strategist at the private-banking unit of KeyCorp, said by phone from Cleveland. “Investors are getting to a point where they’d prefer to be more cautious.”
Gold Bet
The decline in stocks was tempered by a rally in commodity shares. Gold capped the biggest advance since mid-October as traders unwound bets on lower prices amid speculation that the Federal Reserve will signal short-term interest rates will remain low. AngloGold Ashanti climbed the most since Oct. 22, while Harmony Gold Mining Co. jumped 2.9%.
The iShares MSCI Emerging Markets Index exchange-traded fund added 0.1 percent to $42.02. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, dropped 1.7 percent to 24.44.
Brazil’s Ibovespa reversed gains as Gerdau SA, the South American country’s biggest steelmaker by market value, declined on concern a stronger real will slow exports and after company Chairman Jorge Gerdau Johannpeter said the market is still suffering from overcapacity. Homebuilder Gafisa SA was the best performer on the equity gauge as investors pared bets on higher borrowing costs in Brazil.
Russia, Poland
Most Russian shares fell as OAO Gazprom, the nation’s biggest company, retreated, while food retailer OAO Magnit advanced. The Czech PX Index declined for a seventh day in the longest slide since November 2011. Benchmark gauges in Poland and Turkey also dropped.
China’s benchmark stock index fell as shipbuilder China CSSC Holdings Ltd. slid 5.3 percent and TBEA Co., a maker of electrical transformers, dropped 2.1 percent. Qingdao Haier Co. paced an advance by appliance makers after Alibaba Group Holding Ltd. agreed to invest HK$2.82 billion ($364 million) in the company’s affiliates.
India’s S&P BSE Sensex dropped from a record, led by power utilities and capital goods companies. NTPC Ltd., the nation’s top electricity generator, posted its steepest loss since January 2008. Larsen & Toubro Ltd. slumped the most in two months, pacing losses in the S&P BSE India Capital Goods Index.
The Philippine Stock Exchange Index sank to a three-month low and bonds fell on concern inflation will accelerate after regulators allowed the nation’s biggest power supplier to increase prices by a record.
The premium investors demand to own emerging-market debt over U.S. Treasuries rose two basis points, or 0.02 percentage point, to 333 basis points, according to JPMorgan Chase & Co.
