Philippine stocks plunged below the 7,300 level Thursday, tracking the performance of Asian and US markets which were affected by soaring US Treasury yields.
The 30-company Philippine Stock Exchange index retreated for a second straight day, declining by 83.37 points or 1.14 percent to close at 7,283.79.
The wider all-shares index also dropped 43.37 points, or 1.07 percent, to settle at 4,007.39.
The peso also tumbled to 57.88 against the US dollar Thursday from 57.59 Wednesday.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said the stock market’s decline was in line with the movement of US stocks on rising pressure from US Treasury yields.
As yields rise, bonds become more attractive to investors, offering better returns compared to stocks. The shift could lead to a sell-off in stocks.
The exit of foreign funds also contributed to the fall, with net outflows amounting to P206.43 million. Value turnover was weak atP3.61 billion, below the year-to-date average of P5.18 billion.
All sectors were in the negative territory, with banks incurring most losses, down by 1.77 percent. while industrial dropping by 1.71 percent. Decliners edged advancers, 139 to 53.
Among the index members, International Container Terminal Services Inc. gained 0.49 percent to P409, while DMCI Holdings Inc. fell 3.42 percent to P11.30.
European and US stock markets moved lower Wednesday as investors focused on company earnings, bond yields and the outlook for the US and Chinese economies.
The dollar rose against major rival currencies while oil prices retreated.
“Rising Treasury yields continue to be a major topic of conversation mainly because the market isn’t entirely clear about why they are going up like they are,” said market analyst Patrick O’Hare at Briefing.com.
The yield on 10-year US government bonds has risen to 4.24 percent from 3.73 percent one month ago.
“A more market-friendly explanation suggests they are a byproduct of an improved growth outlook that bodes well for earnings,” said O’Hare.
“A less market-friendly explanation is that rising Treasury yields reflect burgeoning concerns about the budget deficit and inflation heating up again,” he added.
“The economic reports are such that people are losing faith in the idea that we’re going to get aggressive rate cuts,” said Steve Sosnick of Interactive Brokers.
With the US economy in rude health, bets on another bumper cut to interest rates at the Federal Reserve’s next meeting have dwindled, supporting the dollar.
“Another key factor has been the Trump Trade,” said Daniela Sabin Hathorn, senior market analyst at Capital.com.
The Trump Trade describes investors acting in expectation of the economic and political policies of a potential second Donald Trump administration in the United States.
“Betting odds now show a 60-38 advantage for Donald Trump and markets are clearly agreeing with this with yields and the dollar pushing higher as traders expect a rise in public spending and inflation if he is elected,” said Sabin Hathorn.
Analysts argue that a Trump win could see a renewed rise in inflation as the former president favors tax cuts.
Investors were also keeping tabs on corporate earnings reports.
Shares in Boeing dropped 1.8 percent after the aerospace giant reported a major $6.2 billion quarterly loss.
A six-week labor strike has weighed on its commercial plane division, while costly problems bogged down its defense and space business.
About 33,000 IAM workers in the US Pacific Northwest walked off the job on September 13. The union is slated to vote on a new contract that could end the stoppage later Wednesday.
Electric vehicle company Tesla reported higher profits after the closing bell, sending its shares 8.1 percent up in after-hours trading.
Away from company results, shares in Tokyo Metro rocketed 45 percent in Japan’s biggest initial public offering for six years.
Shares in McDonald’s, meanwhile, sank more than five percent as investors reacted to news that one person died and dozens became sick following a severe E. coli outbreak linked to its Quarter Pounder hamburgers.
Gold struck yet another record high with the precious metal profiting from its haven status as markets struggle to nail down a winner in the upcoming US presidential election and fears of an escalating crisis in the Middle East.
Crude futures slid more than one percent having shot higher Tuesday on an indicator pointing to increased demand in China, which is taking measures to stimulate its flagging economy. With AFP
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