Emerging-market stocks tumbled the most in 10 months and currencies depreciated as weaker China manufacturing data and speculation the Federal Reserve will scale back stimulus cut demand for riskier assets. Russia led losses in Europe.

Taiwan Semiconductor Manufacturing Co., the world’s largest contract maker of chips, slumped the most since June in Taipei. Cosco Pacific Ltd., the container-terminal arm of China’s biggest shipping group, retreated 2.1 percent in Hong Kong. OAO Bashneft, a Russian regional crude refiner, fell as much as 6.7 percent in Moscow, as oil declined for a third day. KGHM Polska Miedz SA, Poland’s sole copper producer, sank in Warsaw as industrial metal slid the most in three weeks. The rand weakened for an 11th day, its longest losing streak in 25 years.

The MSCI Emerging Markets Index declined 2 percent to 1,027.20 at 13:25 p.m. in London, set for the steepest drop since July 23. The gauge’s 30-day volatility rose to 12, the highest level in seven months. China’s manufacturing unexpectedly shrank for the first time in seven months, a report showed today. The Fed could “step down” the pace of asset purchases if the U.S. labor market continues to improve and “we have confidence that that is going to be sustained,” Chairman Ben S. Bernanke said yesterday.

“Weak data from China combined with speculation the Fed may phase out quantitative easing are causing jitters in the market,” Paul Joseph Garcia, who helps manage the equivalent of $18 billion as head of institutional business at BPI Asset Management Inc., said in Manila. Investors are “reducing their holdings of risk assets,” Garcia said.

Micex Slides

The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose 4 basis points, or 0.04 percentage point, to 272 basis points, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index.

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong dropped 2.8 percent, the most since April 5. Russia’s Micex Index slid 2.9 percent, heading for it steepest loss since July 23 and falling for the first time in five days. Benchmark indexes in Turkey and the Czech Republic retreated at least 1.6 percent.

Bashneft slumped 6.6 percent, its first decline in six days, while OAO Rosneft, Russia’s biggest crude producer, lost 3.8 percent, the most on a closing basis since May 4. Oil fell 1 percent on China data and U.S. gasoline stockpiles increased.

Zero Dividends

OAO TNK-BP Holding declined 4.1 percent, poised for the lowest close since April 5, after Igor Sechin, chief executive officer of the oil company’s new owner, stoked concern shareholders won’t get a payout for last year. Sechin proposed that state-controlled Rosneft will be accountable for TNK-BP dividends from March 21, the date when it took control of the company, Rosneft’s press service said today by phone.

“Dividends might be zero,” Stanislav Kopylov, who helps manage about $3 billion at UralSib Asset Management in Moscow, said by phone.

KGHM retreated 3.7 percent in Warsaw as copper, lead, zinc and nickel fell in London after manufacturing shrank in China, the world’s biggest consumer of industrial metals.

OTP Bank Nyrt., Hungary’s largest lender, fell as much as 2.4 percent before trading down 0.7 percent in Budapest, its first decline in three days, after Prime Minister Viktor Orban said he supported raising taxes on financial transactions and banks.

India’s S&P BSE Sensex slipped 1.9 percent, falling to its lowest level in more than two weeks. Unitech Ltd., plunged 11 percent in Mumbai, leading losses among Indian real estate developers.

Rand Plunges

The South Korean won and the Philippine peso weakened at least 1.2 percent against the dollar, leading losses among the major emerging-market currencies tracked by Bloomberg. The South African rand lost as much as 1.3 and traded 0.3 percent lower on speculation the Fed will scale back stimulus measures. Reserve Bank Governor Gill Marcus will announce the nation’s interest rates today, with 19 of 20 economists surveyed by Bloomberg expecting the rate to be held at a 30-year low.

“Emerging-market currencies are seen as a risk asset class and the volatility created by Bernanke’s testimony” is dragging them down today, Michael Ganske, head of emerging markets at Rogge Global Partners Plc in London, said by e-mail. “Market participants are nervous and are sitting on profits in this risk position.”

China Manufacturing

The May preliminary reading for HSBC Holdings Plc and Markit Economics’ Chinese Purchasing Managers’ Index was 49.6, down from April’s final 50.4 level. A reading below 50 indicates contraction. The number for May missed the 50.4 median estimate in a Bloomberg survey. The final reading is due on June 3.

Bernanke said a premature withdrawal of stimulus could endanger the U.S. economic recovery as policy makers debated tapering the pace of its bond purchase program.

“Beyond easier policy a reversal of the underperformance of EM equities would require clear signs of data acceleration, which we have not yet seen,” Goldman Sachs Group Inc.’s economists including Jose Ursua in New York said in an e-mailed report dated yesterday.

Thailand’s SET Index slumped 1.5 percent while Taiwan’s Taiex Index retreated 1.9 percent, the most since April 8. South Korea’s Kospi index sank 1.2 percent

Gauges of all 10 industry groups in the MSCI Emerging Markets Index dropped, led by technology and energy companies, which lost at least 2.5 percent. Taiwan Semiconductor lost 3.6 percent, its third day of declines. Cosco Pacific fell the most since April 29.

Daewoo Slides

Daewoo International Corp. tumbled 5.7 percent in Seoul after Mirae Asset Securities Co. cut its share-price estimate to 45,000 won from 50,000 won, citing a dim industrial outlook.

PT Media Nusantara Citra plunged 9.7 percent in Jakarta. Saban Capital sold its $85 million stake in Media Nusantara, according to two people familiar with knowledge of the matter.

The MSCI developing-nations gauge has fallen 2.6 percent this year, compared with a 12 percent increase in the MSCI World Index of developed-country stocks. The emerging-markets measure trades at 10.5 times 12-month projected profit, compared with the MSCI World’s 14 times, data compiled by Bloomberg show.