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Stocks, peso plunge on rising crude prices

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Local stocks and the peso plummeted Friday amid massive sell-off as investors worry over escalating global crude prices despite the softening local inflation.

The Philippine Stock Exchange index lost 125.92 points, or 1.91 percent, to close at 6,450.84, while the broader all-shares index went down by 51.88 percent to settle at 3,447.61.

China Bank Capital managing director Juan Paolo Colet said even as the July inflation rate eased to 16-month low at 4.7 percent from 5.4 percent in June, investors were worried that upward pressures were building up especially for socially-sensitive commodities like rice and oil.

Philstocks Financial Inc. research analyst Claire Alviar said there were also concerns over increased US bond yields after a credit downgrade.

“The selling pressure was strong this time as the net market value turnover was recorded at P6.52 billion, higher than this year’s average of P5.11 billion,” Alviar said.

The peso aso retreated to its lowest in more than one month, pulled down by higher global oil prices, weaker local stock market and the expected tail-end of the seasonal increase in remittances from overseas Filipino workers.

The local currency lost P0.22 to close at 55.74 against the greenback Friday from 55.52 Thursday. It was its weakest level since settling at 55.77 on June 23, 2023.

Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said the dollar’s strength was noted “after global crude oil prices lingered at among 3.5-month highs recently, after Saudi Arabia extended its unilateral production cut of 1 million barrels per day by another month and hinted that deeper reductions may be on the way.”

“The peso also weakened after the latest decline in the PSEi by -125.92 points or 1.6 percent to close at 6,450.84, new two-week lows since July 11, 2023…,” he said.

Ricafort said another factor that contributed to the peso’s weakness was the “tail-end” of the seasonal increase in OFW remittances for tuition and other school opening-related payments, to be followed by the seasonal increase in importation in the third quarter.

Meanwhile, Asian markets were mixed Friday at the end of a volatile week, with a fresh spike in US Treasury yields weighing on Wall Street and traders still concerned about the Federal Reserve’s interest rate plans. With AFP

The euphoria of last week — fueled by optimism the US central bank’s tightening cycle was over, as well as China’s pledges of economic stimulus — has given way to uncertainty again, as analysts warn the road ahead remains bumpy.

Jobs data over the past few days has reminded traders that while inflation is coming down, the Fed still has a lot of work to make sure it continues to fall to its two percent target and stays there.

News that jobless claims were still around the lowest levels of the year added to unease — the central bank has warned loosening the jobs market is key to fighting inflation.

That put upward pressure on Treasury yields — flagging higher Fed rates down the line — compounding Fitch’s decision to cut the United States’ gold-standard AAA rating on Tuesday.

Attention now turns to the release of jobs creation figures later Friday, which could play a key role in the Fed’s rate decision-making, particularly after officials at the bank said they would be more data-dependent in future.

A forecast-busting reading on private firms hiring spooked investors.

“Having just come off the back of another 25-basis-point rate hike from the Federal Reserve last week, and what may well be the final rate hike of this cycle, (the) US payrolls data is likely to continue to showcase the resilience of the US economy,” said CMC Markets analyst Michael Hewson.

Wall Street sank in response to the higher Treasury yields, extending a sell-off that has marked the week in New York.

Asia fared a little better, though sentiment remained fragile.

Hong Kong and Shanghai rose, helped by a meeting between the heads of the People’s Bank of China and several companies that ended with a pledge for fresh support to the troubled property sector.

The gathering and pledge come after authorities outlined a number of measures to stimulate the economy, including some aimed at real estate.

“Developers have had some refinancing troubles again recently,” Ding Shuang, at Standard Chartered said. “Support will be targeted toward high-quality companies.”

Tokyo, Sydney, Wellington, Mumbai and Bangkok also rose. However, Singapore, Seoul, Manila, Jakarta and Taipei were in the red.

London dipped in the morning but Paris and Frankfurt rose.

Analysts said the selling could also be attributable to profit-taking after markets enjoyed a broadly strong July.

SPI Asset Management’s Stephen Innes added: “August is commonly perceived as a quiet month.

“Still, this week’s risk-off tenor reminds you that the market can swing big on unexpected events due to the low liquidity and tepid trading activity.”

Oil prices edged higher, extending a rally of more than two percent Thursday that came after Saudi Arabia’s decision to extend its voluntary production cut of one million barrels per day for another month. With AFP

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