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Friday, March 29, 2024

Stocks decline on concerns over banking sector turmoil

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Stocks retreated Wednesday driven by fears of banking sector turmoil and jitters over interest rates.

The PSE index, the 30-company benchmark of the Philippine Stock Exchange, shed 66 points, or 0.99 percent, to close at 6,606.69 as five of the six subsectors declined, with mining and oil as the exception.

The broader all-share index also lost 21 points, or 0.61 percent, to settle at 3,525.18 on a value turnover of P4.92 billion. Losers outnumbered gainers, 91 to 86, while 56 shares were unchanged.

Only two of the 10 most active stocks ended in the green. ACEN Corp. rose 0.50 percent to P6.00, while Robinsons Land Corp. gained 0.41 percent to P14.64.

Meanwhile, the peso barely moved Wednesday to close at 55.33 against the US dollar. The local currency was also up 0.61 percent since the start of this year’s trading,

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European stocks enjoyed modest gains in early trading Wednesday as cautious investors awaited an anticipated US Federal Reserve interest rate hike later in the day, as well as a similar decision by the European Central Bank expected on Thursday.

“Caution is set to take center stage ahead of the Fed’s interest rate decision later, as investors mull what’s ahead for the mighty US economy,” said Susannah Streeter, head of money and markets at stockbroker Hargreaves Lansdown.

Interest rate worries had the opposite effect on Wall Street the day before, conspiring with falling confidence in regional banks to fuel losses that bled over into Asia as Wednesday’s trading got under way.

Sydney finished nearly one percent down after the Australian central bank hiked interest rates there to an 11-year high—a surprise move that dashed hopes it would hold rates steady as inflation showed signs of slowing.

Hong Kong, meanwhile, finished 1.2 percent down, and Seoul, Taipei, Wellington, Jakarta, Singapore, Kuala Lumpur, Mumbai and Bangkok were all in the red as well.

Markets in Japan and mainland China were closed for holidays.

US futures, meanwhile, were edging back up after the previous day’s hefty losses.

Also weighing on investor sentiment were fears that Democrats and Republicans could fail to reach a deal on raising the US debt ceiling, triggering a default by the world’s largest economy as early as June 1.

“It is a key event risk in the next few weeks and possibly a month or two,” BNY Mellon Investment Management’s Aninda Mitra told Bloomberg Television, adding that the impasse “feeds into our overall defensiveness”.

Stephen Innes, of SPI Asset Management, said that even if a crisis were averted, it may create a drag on markets.

“As we have seen in the past, a resolution to the debt limit is likely to occur,” he said in a note.

“The problem for risk markets is a negotiated deal may include a pullback in government spending that could negatively impact US growth.”

Oil prices, meanwhile, sank even lower on Wednesday after tumbling the day before, with the US benchmark oil contract, WTI, briefly dipping under $70 per barrel for the first time since OPEC+ cut output a month ago.

The main international contract, Brent North Sea, was also down, trading under $74 per barrel.

The recent drops have erased gains seen after the OPEC+ production cut was announced at the beginning of April.

“Downward price pressure could persist in oil markets until it becomes clear that a significant recession will be avoided and growth in global oil demand won’t be stunted,” Innes said. With AFP

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