PH market pares losses; Asia, US stocks plunge
The local stock market continued to bleed, but managed to bounce back from the day’s low, on news of a high inflation rate and after the US market recorded its worst-one day point drop in history.
Regina Capital Development Corporation President Marita Limlingan said though that local bourse is not seen to enter a bear market for as long as growth data is good.
The Philippine Stock Exchange Index closed 65.58 points or 0.76 percent lower at 8,550.42 after falling to as low as 8,379 with all sectors in the red as foreign investors continued to exit the market.
Meantime, a rout in global equities deepened in Asia on Tuesday as inflation worries gripped financial markets, sending US stock futures sinking further into the red after Wall Street suffered its biggest decline since 2011.
S&P mini futures fell as much as 3.0 percent to fourmonth lows, extending their losses from the record peak hit just over a week ago to 12 percent, abruptly ending their smooth bull run of recent years. They last stood down 1.1 percent.
The US benchmark S&P 500 slumped 4.1 percent and the Dow 4.6 percent on Monday, suffering their biggest percentage drops since August 2011.
Before Monday’s fall, the index had not seen a pullback of more than 5 percent for more than 400 sessions, which analysts said was the longest such streak in history.
“Since last autumn, investors had been betting on the goldilocks economy solid economic expansion, improving corporate earnings and stable inflation. But the tide seems to have changed,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
The gloom is seen enveloping European shares, with spread-betters expecting Germany’s Dax to sink 6.6 percent to five-month lows, France’s Cac 6.1 percent to possibly 11-month lows and Britain’s FTSE 4.8 percent to 14-month lows.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan slid 3.4 percent. Taiwan shares lost 5.0 percent, its biggest since in 2011 and Hong Kong’s Hang Seng Index dropped 4.2 percent.
Japan’s Nikkei dived 4.7 percent, its worst fall since November, 2016, to four-month lows.
The trigger for the sell-off was a sharp rise in US bond yields following Friday’s data that showed US wages increasing at the fastest pace since 2009, raising the alarm about higher inflation and with it potentially higher interest rates.
That could be painful for markets that have been propped up by central banks’ stimulus for many years.
Some analysts also say markets tend to get edgy when the US Federal Reserve has a new leadership.
The new Fed chief Jerome Powell, who succeeded Janet Yellen this month, is expected to continue Yellen’s stance of gradual tightening. Still, some investors regard a change in the Fed leadership as a source of policy uncertainty.
The 10-year US Treasuries yield rose to as high as 2.885 percent on Monday, its highest in four years and 47 basis points above the 2.411 percent seen at the end of 2017.
But a massive fall in share prices prompted an aboutturn, and in Asian trade on Tuesday, it fell back to as low as 2.662 percent.
Fed fund futures are now pricing in only two rate hikes this year, a sea change from only a few days ago when they priced in about 80 percent chance of three increases with the market even rife with talk of four hikes.(James A. Loyola, Reuters)