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Stocks fall ahead of Q4 GDP report

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Philippine stocks dropped Tuesday ahead of the US Federal Reserve policy meeting and the fourth-quarter Philippine gross domestic product (GDP) data release.

The Philippine Stock Exchange index, the 30-company barometer, slipped 8.67 points, or 0.13 percent, to close at 6,622.01, while the broader all-shares index was unchanged at 3,487.71.

Philstocks Financial Inc. research analyst Mikhail Plopenio said the market decline was due to last-minute profit-taking as investors turned cautious while waiting for the release of key economic data.

“Investors seem to have digested Moody’s Analytics’ Q4 2023 GDP growth projection for the Philippines which is at 4.9 percent, slower than the previous quarter which stood at 5.9 percent,” Plopenio said.

Worries about the China’s economy growth also affected investor sentiment as a Hong Kong court issued a liquidation order versus Chinese property developer The China Evergrande Group.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said the market corrected for the second straight day due to volatility in foreign exchange rate and the recent spike in global fuel prices.

Meanwhile, Asian markets were mixed Tuesday as another record on Wall Street was unable to help extend the previous day’s advance, with traders eyeing a Federal Reserve meeting, big-name earnings and key data.

They were also trying to ascertain the long-term impact of Monday’s order from a Hong Kong judge to liquidate indebted developer Evergrande, which fanned fresh fears about China’s already fragile economy.

Another all-time high for the Dow and S&P in New York was fueled by a retreat in yields caused by a cut in the Treasury’s quarterly borrowing forecast, which eased worries about a flood of debt hitting financial markets.

That came ahead of the Fed’s latest policy meeting, where traders expected it to hold interest rates but hope to get some future guidance, with a 50 percent chance of a March cut.

The Fed’s meeting is followed by the closely watched non-farm payrolls report and earnings from Wall Street tech titans including Microsoft, Google parent Alphabet, Apple and Facebook parent Meta.

“This week could be key,” said Chris Larkin at E*Trade from Morgan Stanley.

“If the market is going to sustain its latest breakout, it may need to avoid earnings disappointments from this week’s big-tech lineup, get encouraging news from the Fed on interest rates, and see jobs numbers that are solid, but not too hot.”

Some Asian markets tracked the US gains, with Tokyo, Sydney, Singapore, Bangkok and Jakarta in the green.

Seoul, Taipei, Manila and Mumbai were down.

But Hong Kong and Shanghai led losses a day after Evergrande’s liquidation order, the latest blow to China’s shattered property sector, which has seen numerous firms crippled by ballooning debts since a government clampdown began in 2020.

With Evergrande’s debts topping $300 billion, the winding-up has sparked speculation about how creditors will actually get their cash back, or even if they will, and what that could mean to China’s long-term economic prospects.

The crisis in the property sector has been a key factor in a sharp slowdown in growth in the world’s number two economy, and leaders’ failure to come up with big enough stimulus has seen equity markets tank in recent years.

“Whether overseas creditors will have any claim on Evergrande’s domestic assets and so recover some cents in their dollars, is a point of contention,” said National Australia Bank’s Ray Attrill.

“If not, it can only further dampen international enthusiasm toward future investments in China.”

And Moody’s Investor Service warned: “The decision is credit negative for the broader property sector as it will weaken already-fragile investor and market sentiment.”

The dire performance of the Chinese economy and stock markets is putting increasing pressure on officials to come up with a support plan and there is speculation that announcements will come at upcoming Communist Party meetings, while talk of an interest rate cut is also swirling.

“Market expectation for a rate cut in February is gaining traction, especially after (the central bank’s) surprising announcement to cut RRR,” said Ming Ming, at Citic Securities, referring to a reduction in the proportion of cash banks must keep in reserve, to boost lending.

Paris opened higher as data showed France’s economy grew below government forecasts in 2023 and stagnated in the final three months of the year.

London and Frankfurt rose. With AFP

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