Emerging-market stocks tumbled the most in seven weeks, currencies weakened and borrowing costs rose as Europe’s debt crisis worsened. The MSCI Emerging Markets Index sank 2 percent to 1,120.04 at 9:42 a.m. in London, poised for its biggest drop since May 23. The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose six basis points to 3.19 percentage points, the highest level in two weeks, according to JPMorgan Chase & Co.’s EMBI Global Index. Poland’s zloty weakened 1.2 percent against the euro, while the South African rand depreciated 1 percent versus the dollar. The MSCI index was set for its largest two-day drop since June 2010 as surging yields on Italian and Spanish bonds spurred concern that the nations will struggle to refinance debt. Infosys Ltd., India’s second-largest software exporter, lost 5.2 percent in Mumbai and led MSCI’s gauge of emerging-market technology stocks to a 2.9 percent slide, the biggest among 10 industries. “Risk appetite nosedived with the contagion concerns from Eurozone issues coming to the forefront again,” David Hauner, a London-based strategist at Bank of America Merrill Lynch, wrote in a report today. The Hang Seng China Enterprises Index tumbled 3.7 percent, the most since May 2010, after Moody’s Investors Service said some Chinese companies are engaging in potentially risky business practices. The Bombay Stock Exchange Sensitive Index lost 1.9 percent, while Russia’s Micex index slid 0.4 percent. East Europe Retreat Poland’s WIG20 retreated 0.8 percent, the Czech PX Index declined 1.3 percent and Hungary’s BUX slid 0.8 percent. The ISE National 100 Index in Turkey tumbled 1.2 percent as the lira fell to the weakest versus the dollar since April 2009. The Markit iTraxx SOVX CEEMEA Index of credit-default swaps for emerging Europe, the Middle East and Africa jumped 14 basis points to 228, the highest level since Nov. 30, according to data provider CMA in London. Nine hours of talks yesterday by European finance chiefs resulted in a six-paragraph statement in which the 17 euro governments pledged to flesh out a new master plan “shortly” to end the 21-month-old crisis, without setting a timeline. The meetings resumed today with all 27 European Union finance ministers planning a response to the release of bank stress tests later this week. Tech Selloff The yield on Italian 10-year bonds rose above 6 percent for the first time since 1997, data compiled by Bloomberg show. Italy has 1.6 trillion euros ($2.25 trillion) of bonds outstanding, the world’s third-largest debt pile after the U.S. and Japan, while Spain owes 655 billion euros. Europe’s common currency fell to the lowest in almost four months versus the yen today. The MSCI Emerging Markets Information Technology Index sank the most since March 15. Infosys said sales in the year to March will range from $7.1 billion to $7.3 billion, missing the $7.5 billion average of 56 analyst estimates compiled by Bloomberg. The European debt crisis may put pressure on the profits of banks and financial services companies and that’s an “overhang” for the Indian software industry, said Girish Pai, an analyst at Centrum Broking Pvt. in Mumbai. West China Cement Ltd. sank 14 percent in Hong Kong after Moody’s said it was one of five Chinese companies that had more corporate governance problems than others it examined. The ratings company looked at criteria that “highlight issues meriting scrutiny to identify possible governance or accounting risks,” analysts led by Elizabeth Allen in Hong Kong wrote in a report issued yesterday. All 61 companies Moody’s examined raised “red flags,” with West China Cement, Winsway Coking Coal Holding, China Lumena New Materials Corp., Hidili Industry International Development Ltd. and LDK Solar Co. cited as “negative outliers.” To contact the reporters on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net; Michael Patterson in London at mpatterson10@bloomberg.net. To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net.

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