Brazil, Hong Kong, Spain —take your pick. International uncertainty is the order of the day, and it’s spilling over into U.S. markets.
First, exchange-traded funds that serve as emerging market proxies, like the Brazil ETF, are suffering. The iShares MSCI Brazil index is down 4 percent as voter polls over the weekend indicate the incumbent, Dilma Rousseff has only a small lead over Marina Silva. The country’s stock market there has little love for the incumbent.
The market’s favorite, Aecio Neves, is running a distant third, just as the first round of elections is next weekend. The top two candidates go to the second round, unless the leader has more votes than all other candidates combined. The fear in the markets is Rousseff may win on the first round.
One thing is clear: even if the incumbent prevails, she will be under substantial pressure from the markets to initiate reforms.
Pro-democracy unrest in Hong Kong has their markets down about two percent overnight. More pro-democracy demonstration in Hong Kong on Monday. The Hang Seng Index has swung in a better than 8 percent range in the past three months, going from roughly 23,000 in July, to north of 25,000 in the beginning of September — then straight down for the past several weeks to 23, 155 again.
Europe is also weak. Spain’s stock market is down almost two percent, with modest spikes in Spanish debt yields. Spain’s Prime Minister, Mariano Rajoy, and the Catalonian President, Artur Mas, appear to be clashing over whether the region can keep planning a referendum on independence (echoes of the U.K.’s near-brush with Scotland).