Share prices sank Wednesday, with traders fearing the Federal Reserve’s determination to beat inflation with higher interest rates will tip the world’s top economy into recession.
The Philippine Stock Exchange Index tumbled 106.62 points, or 1.6 percent, to 6,583.65 on a value turnover of nearly P8.9 billion. Losers beat gainers, 128 to 67, with 42 issues unchanged.
SM Investments Corp. of the Sy Group slumped 5.1 percent to P831, while fiber broadband provider Converge ICT Solutions Inc. dropped 3.1 percent to P17.40.
ACEN Corp., a unit of conglomerate Ayala Corp. of the Ayala Group, fell 3 percent to P7.50, but SM Prime Holdings Inc., the biggest integrated property company owned by the Sy Group, rose 2.6 percent to P37.85.
Most Asian markets resumed their downward trend Wednesday.
After bouncing from their June lows, global equities are once again taking a hiding from worried investors after Fed chief Jerome Powell warned last week the bank would need to tighten policy much more to succeed in its battle against prices.
Wall Street’s three main indexes fell for a third straight day Tuesday to sit at a one-month low, with healthy data on US consumer sentiment and job openings indicating the economy remained resilient despite recent rate hikes and four-decade-high inflation.
But analysts said the readings were a case of good news being bad news as they would allow the Fed to stick to its plan of lifting borrowing costs further. Expectations are growing for a third successive three-quarter-point increase next month.
Traders are now awaiting the release of US job-creation figures on Friday for a better idea about the state of the economy.
However, commentators said trying to plot a course through the next few months would be tricky owing to inflation and rate increases as well as other issues such as the Ukraine war, geopolitical tensions and China’s COVID-damaged economy.
“What’s clear is that predicting this market is not clean cut,” Angeline Newman, of UBS Global Wealth Management, told Bloomberg Television.
“We are living in a world where conflicting economic signals are making the path of monetary policy very difficult to determine.”
Shanghai dropped after a report on Chinese factory activity showed another contraction, as the sector was buffeted by lockdowns due to Beijing’s zero-COVID strategy and high temperatures that led to energy rationing.
The reading reinforced the view that the world’s number-two economy continued to struggle.
There were also losses in Tokyo, Sydney, Singapore, Wellington and Bangkok, though Seoul, Jakarta and Taipei rebounded from early losses. Hong Kong was flat.
“Having seen such a promising start to August, last week’s speech by… Powell appears to have been the final straw for any sort of hope that we might see another positive month for equity markets,” said CMC Markets analyst Michael Hewson.
Worries about an economic slowdown and the possible hit to demand were also dragging on oil, which was on course for a third monthly drop, with both main contracts tumbling more than five percent Tuesday. With AFP