Stocks slumped Wednesday along with the rest of Asia, tracking losses in the United States and Europe as traders responded negatively to higher-than-expected US inflation data that raised fears of a prolonged period of interest rate hikes.
The Philippine Stock Exchange Index tumbled 118.95 points, or 1.8 percent, to 6,582.86 on a value turnover of P5.3 billion. Losers overwhelmed gainers, 137 to 41, with 46 issues unchanged.
BDO Unibank Inc. of the Sy Group, the biggest lender in terms of assets, fell 3.7 percent to P125.10, while parent firm SM Investments Corp. declined 2.8 percent to P859.50.
Noodles maker Monde Nissin Corp. sank 3.2 percent to P15, while San Miguel Corp., the largest beer producer, dropped 3.1 percent to P95.
The rest of Asian markets dropped on Wednesday. Tokyo, Hong Kong, Shanghai, Seoul, Taipei and Sydney were all lower, reversing gains made in recent days due to positive market expectations from the US labor department’s consumer price index (CPI) report.
On Tuesday, US government data showed the annual increase in CPI had slowed slightly in August to 8.3 percent, but that prices continued to rise month-on-month, increasing by 0.1 percent.
The news shook equity markets, where there had been widespread expectations of US year-on-year inflation being around eight percent, with a decrease in prices compared with July.
Tokyo led the day’s losses in Asia, with the Nikkei 225 plunging 2.8 percent.
In Hong Kong, stocks closed down more than two percent, with Chinese conglomerate Fosun seeing billions wiped off its value as jittery investors reacted to media reports that the group was under regulator scrutiny.
The United States and other economies have been battling sky-high price increases for months, with US yearly inflation hitting a 40-year high of 9.1 percent in June.
Wall Street shares plunged following the CPI news, with the Dow losing nearly 1,300 points and the S&P 500 falling 4.3 percent on Tuesday.
The data will have dashed hopes of a slowdown in the US Federal Reserve’s campaign of increasing interest rates to cool the overheating economy.
The Fed has already instituted two consecutive 75-basis-point hikes, and there are widespread expectations it will make a similarly sized increase at its meeting next week.
After Tuesday’s data, however, some investors are now predicting the next Fed hike could be by a full percentage point.
Of concern to the Fed will be the fact that “core” US CPI, which excludes volatile food and energy prices, accelerated sharply, rising 6.3 percent on a year ago, higher than the 5.9 percent seen in July and June.
Despite welcome relief from falling gasoline prices, food, housing and medical care costs continued to rise.
“Core inflation was scorching hot, coming in double expectations,” said senior market analyst Edward Moya at OANDA.
“The Fed will likely have to be even more aggressive with raising rates and that is bad news for risky assets.”
Investor Louis Navellier warned that persistently high interest rates to control inflation could lead to a US recession.
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