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Tuesday, July 23, 2024

PH stocks fell for third day on high interest rate concerns

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Philippine stocks closed lower for the third straight trading day on expectations that interest rates will remain high for an extended period after February inflation rate came in higher than the previous month’s level.

The benchmark Philippine Stock Exchange index dropped 26.92 points, or 0.39 percent, to close at 6,878.54, while the broader all-shares index shed 16.68 points, or 0.46 percent, to settle at 3,587.59.

Philstocks Financial Inc. research analyst Claire Alviar said that aside from high February inflation rate, the negative cues from Wall Street contributed to the market’s decline.

All the sectoral indices ended in the red except for the financial sector.

Meanwhile, Asian shares mostly gained on Wednesday after global markets fell as traders locked in profits following recent tech-driven rallies.

Gold prices and bitcoin hit all-time highs Tuesday before reversing gains, while the sell-off in some technology stocks hit many markets around the world.

Wall Street’s three main indexes declined, with the tech-rich Nasdaq ending the day 1.7 percent lower, pulled down by Apple and Tesla.

Apple’s shares fell after news that iPhone sales in China were lower early this year, serving as “a stark reminder of the ongoing trade tensions between the United States and China,” said Stephen Innes of SPI Asset Management.

While US stock indices are up sharply on the year, the recent rallies have relied heavily on a few mega-cap stocks.

“Negative news about these key players can trigger a broader pullback across the entire index spectrum, even more so if sales worries emanate from China, which makes up a hefty portion of these tech behemoth earnings from a geographical perspective,” Innes said.

If former US president Donald Trump is re-elected and were to impose significant tariffs on Chinese imports, trade tensions could escalate, he said.

“US tech investors could pay the price.”

On Tuesday, Asian markets faltered after China kicked off its annual rubber-stamp legislative session by setting an ambitious 2024 growth target of five percent.

The figure is in line with last year’s goal but well off the double-digit expansion that for years drove the world’s second-largest economy.

Traders were underwhelmed and global equities wobbled.

“Premier Li (Qiang)’s opening speech to the National People’s Congress yesterday indicates China is staying the course, in terms of refraining from a big stimulus,” economists Duncan Wrigley and Kelvin Lam of Pantheon Macroeconomics said in a note.

Experts have called for deeper interventions to aid China’s flagging economy, which is beset by a prolonged property sector crisis, record youth unemployment, and a global slowdown that is hammering demand for Chinese exports.

Wrigley and Lam said Beijing was “balancing the imperative to support short-term growth and employment with the desire to shift the growth model towards advanced manufacturing and away from an over-reliance on real estate.”

The country was likely to “rely mainly on fiscal support to keep growth at an acceptable level, while monetary policy will play an accommodative role, with only token rate cuts,” they added.

In addition to the NPC, investors will be focused on congressional testimony by Federal Reserve chair Jerome Powell on Wednesday and Thursday, as they seek signs of when the US central bank might start cutting rates.

Most analysts expect highly anticipated Fed rate cuts to begin later this year, as officials have voiced caution about trimming too soon while they await further inflation data.

US jobs figures are due on Friday.

Tokyo’s key Nikkei index ended marginally lower on Wednesday, and Shanghai closed down.

Hong Kong shares bounced back, adding 1.7 percent at the close after finishing more than two percent lower the day before.

Sydney, Taipei, Wellington, Singapore, Bangkok and Jakarta were also up on Wednesday.

Shares in Seoul, Mumbai, Manila and Kuala Lumpur were lower.

Frankfurt and Paris opened lower and London was flat. With AFP

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