By Michael Patterson
July 1 (Bloomberg) — Emerging-market stocks dropped for a third day, sending the benchmark index to a three-week low, and currencies weakened after Chinese manufacturing growth slowed more than economists predicted and Moodyâ€™s Investors Service said it may downgrade Spainâ€™s credit rating.
The MSCI Emerging Markets Index fell 0.8 percent to 911.07 at 11:38 a.m. in London, heading for the lowest close since June 10. South Africaâ€™s rand slid 0.8 percent against the dollar and the Hungarian forint lost 0.6 percent versus the euro.
Chinaâ€™s Purchasing Managersâ€™ Index dropped to 52.1 in June, missing the 53.2 median forecast of economists in a Bloomberg survey. Moodyâ€™s said yesterday it put Spainâ€™s top credit ranking on review for a possible downgrade. Yields on Spanish five-year bonds and the cost to protect against a default by the country rose. The reports heightened concern that Chinaâ€™s cooling economy and Europeâ€™s debt crisis will undermine the global economic recovery.
â€œThe latest indicators are pointing to a slowdown,â€ said Zhang Ling, a fund manager at Shanghai River Fund Management Co. â€œThe correction is far from over.â€
The MSCI gauge has retreated 7.9 percent this year, while Chinaâ€™s Shanghai Composite Index has tumbled 28 percent to lead declines in major emerging markets. Currencies in 15 of 23 developing nations tracked by Bloomberg have weakened against the dollar so far in 2010.
Commodity Stocks Fall
The China manufacturing report spurred declines in commodities including oil, copper and nickel, dragging down stocks of companies producing those raw materials. Jiangxi Copper Co., Chinaâ€™s largest producer of the metal, slid 2.6 percent to a 14-month low in Shanghai.
OAO GMK Norilsk Nickel dropped 1.2 percent is Moscow trading. Russiaâ€™s Micex Index retreated 2 percent, the steepest decline among major developing-nation benchmark indexes, to a one-month low.
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