Emerging Market Jitters: China Weak, Commodities Producers Tumble -- Barron's Blog DOW JONES & COMPANY, INC. 9:27 AM ET 11/09/15 BHP Billeton ( BHP) said it might cut its iron ore output in the wake of a mine-dam disaster in Brazil, sending shares down nearly 2% pre-market after a 5% tumble Friday.
Other mining stocks are also lower. Vale ( VALE), which operated a joint venture with BHP at the Brazil mine where the dam collapsed, was down 1% after a 6% drop Friday. The iShares MSCI Brazil Capped exchange-traded fund ( EWZ) and the iShares MSCI Emerging Markets ETF ( EEM) were each down more than 1% pre-market.
The disaster in Brazil isn't the only source of market pressure for mining companies. China's imports tumbled 10% in October, data released Sunday revealed, meaning more pressure for commodities demand. And, Friday's U.S. jobs data indicates the U.S. Federal Reserve could increase interest rates in December, putting more pressure on beleaguered emerging market economies. Bank of America/Merrill Lynch writes today:
"Downward revisions in potential GDP may not be over. We see downside risks to estimates for the United States and China. As a result, the output gap may not be as big as it appears, implying less downside risk to global inflation. ... Consensus is no crisis or hard landing in China, but the impact of its slowdown and rebalancing on Latin America remains uncertain. Main concern is that the slowdown is more structural than cyclical in nature. Inflation is pushing central banks to act. BCCh [Central bank of Chile] hiked 25 basis points and we expect more hikes. Expect the BCB [Central Bank of Brazil] to be on hold next week."
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