Market retreats; Chelsea climbs

Stocks retreated from a five-month high after a blockbuster US jobs report dashed hopes that the Federal Reserve would slash interest rates this month.

The Philippine Stock Exchange index, the 30-company benchmark, fell 66 points, or 0.8 percent, to close at 8,051.52 Monday.  Despite the loss, it was still up 7.8 percent since the start of the year.

The broader all-share index also dropped 32 points, or 0.6 percent, to settle at 4,913.47, on a value turnover of P5.6 billion.  Losers outnumbered gainers, 119 to 74, while 50 issues were unchanged.

Six of the 20 most active stocks ended in the green, led by Chelsea Logistics and Infrastructure Holdings Corp. of businessman Dennis Uy which climbed 5 percent to P9.02. Mislatel Consortium led by Uy recently secured a government permit to operate as the country’s third major telecom player.

Renewable energy producer First Gen Corp. rose 2 percent to P27.50, while airport operator and construction firm Megawide Construction Corp. went up 1.7 percent to P18.30.

Meanwhile, most Asian stocks also traded lower Monday as the US Labor Department data showed that despite recent disappointing indicators, the world’s top economy continues to show resilience as it created far more posts than expected in June.

The news took traders by surprise and sent all three main indexes on Wall Street falling from record highs, while the dollar bounced against its main peers.

Investors had been hoping the Fed would cut borrowing costs by as much as 50 basis points at its next policy meeting at the end of the month, but Friday’s report reduced the chances of that happening.

Asian investors extended the selling, with Shanghai losing more than two percent, Hong Kong down almost two percent and Tokyo off one percent.

Sydney, Singapore, and Mumbai sank more than one percent. Wellington, Taipei, Bangkok and Jakarta were also lower.

Seoul sank 2.2 percent, hit by a simmering trade row between South Korea and Japan. Tokyo last week imposed restrictions on exports used by South Korea’s tech companies in a dispute over court rulings linked to Japan’s wartime forced labour policy. Samsung fell 2.8 percent and LG Display sank almost five percent.

“Markets remain convinced the Fed will cut rates at the end of the month,” said Oanda senior market analyst Edward Moya.

“But the strong labor market has many questioning whether we will see just two rate cuts in 2019 and not what some call the required three to see US stocks make another 3-5 percent push higher into uncharted territory,” Moya said.

He added that the focus will now turn on Fed boss Jerome Powell’s congressional testimony this week, with investors hoping he will provide some forward guidance on the bank’s plans.

“The testimony this week will be crucial around how they are seeing the evolution of the US economy,” Anne Anderson, at UBS Asset Management, told Bloomberg TV. 

Also up this week is the release of minutes from the Fed’s June meeting, while US and Chinese officials are working to schedule top-level trade talks.

On currency markets, the dollar maintained Friday’s gains against the yen, pound, and euro.

And it surged more than three percent on the Turkish lira after President Recep Tayyip Erdogan sacked the head of the country’s central bank following months of tensions over high borrowing costs.

Erdogan, who is battling to boost the struggling economy, has repeatedly railed against high-interest rates and called for them to be lowered to stimulate growth.

The removal of Murat Cetinkaya at the weekend fuelled speculation the bank will slash borrowing costs. With AFP

Topics: Chelsea Logistics and Infrastructure Holdings Corp. , Dennis Uy , Mislatel Consortium , First Gen Corp.
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