Stocks and peso decline on US debt default risks

THE peso and the local stocks fell Monday as investors kept an eye on the talks to raise the US debt limit to avert a “catastrophic” default.

The peso retreated 0.5 percent Monday to breach the 56-adollar mark and close at 56.07 against the greenback from Friday’s 55.79.

Local stocks also reflected Wall Street’s losses on Friday after the Congressional Budget Office said there was a “significant risk” that the country could default by June 15 if there is no deal on raising the debt ceiling.

The PSE index, the 30-company benchmark of the Philippine Stock Exchange, shed 55 points, or 0.84 percent, to close at 6,523.15 as five of the six subsectors declined, with mining and oil the only exception.

The index representing all shares also went down by 19 points, or 0.57 percent, to settle at 3,491.10 on a value turnover of P4.14 billion. Losers outweighed gainers, 106 to 86, while 42 issues were unchanged.

Data showed that of the 10 most active stocks, only BDO Unibank Inc. ended in the green, rising 0.22 percent to close at P135.80.

The uncertainty on debt limit weighed on Wall Street, with all three main indexes ending in the red on Friday, and Asia mostly followed suit.

There has been some progress on reaching a deal but Democrats and Republicans remain at loggerheads, though President Joe Biden said he was confident the debt ceiling will be raised.

Republicans are demanding budget cuts in exchange for lifting the limit, while the White House has insisted for months that the nation’s credit should not be up for negotiation.

There is a general view among traders that the two sides will hammer out a deal, though some observers warn that the mere threat of a default was weighing on market sentiment.

Meanwhile, the Congressional Budget Office said there was a “significant risk” that the United States could default by June 15 if there is no deal.

Deputy Treasury Secretary Wally Adeyemo told CNN on Sun

Standard Manila day: “If Congress failed to raise the debt limit by the time of TODAY default, we would go into a recession and it’d be catastrophic.

“The United States of America has never defaulted on its debt—and we can’t.”

The uncertainty weighed on Wall Street, with all three main indexes ending in the red on Friday, but Asia enjoyed a broadly healthy start to the week, bouncing back from morning losses.

Tokyo, Hong Kong, Shanghai, Sydney, Seoul, Singapore and Mumbai rose though there were losses in Taipei and Jakarta.

London, Paris and Frankfurt were all up in the morning as the European Union lifted its 2023 economic growth forecast.