The stock market and the rest of Asia sank on Wednesday as an upbeat assessment of the US economy by Federal Reserve boss Jerome Powell fanned new fears of a sharp rise in interest rates.
The Philippine Stock Exchange Index plunged 117.09 points, or 1.4 percent, to 8,475.29 on a value turnover of nearly P10 billion. Gainers, however, beat losers, 111 to 96, with 52 issues unchanged.
Major property developer Ayala Land Inc. lost 3.3 percent to P41.10, while JG Summit Holdings Inc. of industrialist John Gokongwei dropped 4 percent to P72.
SM Investments Corp. of retail tycoon Henry Sy fell 3.1 percent to P940, while unit SM Prime Holdings Inc. declined 3 percent to P35.30.
The new US central bank boss in his closely watched debut before lawmakers said the outlook had improved since December, when Donald Trump pushed through massive across-the-board tax cuts.
While it was a positive sign for the world’s top economy, the appraisal spooked investors already on edge at the prospect of higher borrowing costs. They forecast four rate rises this year rather than the three previously expected.
Stephen Innes, head of Asia-Pacific trading at OANDA, said Powell’s tone suggested he would be moderate, but added that “his pointer at the topside potential for both inflation and growth suggests the risks are skewed for a bolder monetary policy response”.
The Fed boss’s comments sent all three main Wall Street indexes plunging more than one percent and the dollar surging against most other currencies.
The yield on the key 10-year US Treasury bond, a proxy for interest rates, also jumped.
World markets suffered a sharp drop at the start of February after strong jobs and wages data sparked concerns that inflation would surge, and in turn force the Fed to ramp up borrowing costs.
On Wednesday Hong Kong sank 1.4 percent and Shanghai closed down one percent. Traders were also weighed down by faltering Chinese factory activity, which slowed to a 19-month low in February.
While the reading was hit by the Lunar New Year break, it was a third successive monthly fall in the purchasing managers’ index.
Tokyo finished 1.4 percent lower, hit by a stronger yen, while Sydney dropped 0.7 percent.
Singapore eased 0.2 percent and Seoul was off 1.2 percent, with Mumbai also lower.
However, Jim McDonald, Northern Trust Corp’s chief investment strategist, remained upbeat.
“If they do go four times, we think it’s going to be for the right reasons—which is that growth is good, inflation is not out of control,” he told Bloomberg TV. “That will not be a bad environment for risk-taking.”
With bets piling up on higher interest rates, the dollar rallied on Tuesday and extended the gains in Asia against the pound and euro, though the safe-haven yen edged back up.
The greenback also racked up strong gains against other regional currencies, with the Australian dollar down 0.5 percent and South Korea’s won more than one percent down. The Thai baht, Indonesian rupiah and New Zealand dollar were also well down.
Mexico’s peso, the South African rand and Canadian dollar were also almost one percent off. With AFP