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Stocks drop below 6,000; gold soars to record high

The stock market plunged Monday, with the benchmark index falling below 6,000 points, but gold hit a record high as investors rushed into the safe-haven on concerns about China-US tensions, a spike in virus infections around the world and a lack of progress on a new stimulus bill in Washington.

The Philippines Stock Exchange Index sank 142.32 points, or 2.4 percent, to 5,860.94 on a value turnover of P3.9 billion. Losers overwhelmed gainers, 123 to 72, with 48 issues unchanged.

Banks led losers with Bank of the Philippine Islands, the third-biggest lender in terms of assets, slumping 6.5 percent to P65.

Metropolitan Bank & Trust Co., the second-largest bank, dropped 4.8 percent to P34.30, while Security Bank Corp., the sixth-biggest bank, declined 4.8 percent to P93. 

Conglomerate Ayala Corp. fell 4.3 percent to P710.

The rest of Asian stock markets were mixed as investors fret over the impact of the virus on the economy.

Hong Kong, Tokyo, Singapore, Mumbai and Wellington were all in the red, while Shanghai, Sydney, Seoul and Jakarta were higher.

The tech-rich Taipei market ended at a record high thanks to a 10 percent surge in heavyweight Taiwan Semiconductor Manufactuirng Company, which has been riding a rally in the sector thanks to people working from home during the virus.

After months of healthy rallies across equity markets―fueled by trillions of dollars in government and central bank support―traders are beginning to step back as they weigh the long-term economic impact of the coronavirus.

With vast monetary easing measures put in place by the Federal Reserve pushing the dollar lower against most other currencies, gold is flying, hitting an all-time high of $1,944.71, well above its previous record of $1,921.18 seen in 2011. It later pulled back slightly.

Eyes are on the Fed’s next policy meeting this week, with some predicting further measures to boost the economy―possibly negative interest rates―that could put more pressure on the dollar and send bullion above $2,000.

There are also concerns that a worse-than-forecast reading on second-quarter US gross domestic product could spark another dollar sell-off.

While the weak dollar has been a key catalyst for the metal’s advance, gold has also been boosted by its attractiveness as a haven in times of turmoil with China-US relations souring by the day.

“Strong gains are inevitable as we enter a period much like the post-global financial crisis environment, where gold prices soared to record levels as a result of copious amounts of Fed money being pumped into the financial system,” said Gavin Wendt, senior resource analyst at MineLife.

The greenback was down against most other currencies, with the euro at its highest since September 2018, while higher-yielding units such as the South Korean won and Indonesian rupiah were also up. 

Investors are growing concerned about slow progress on a new US stimulus program, with Republicans still to present proposals worth around $1 trillion, which is less than a third of the plan set out by Democrats. With AFP

Topics: Stock Market , Philippines Stock Exchange , PSE , Philippines Stock Exchange Index , PSEi , Global stock market , China-US tensions
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