Share prices slipped Thursday along with the rest of Asia as as traders grow increasingly worried that central bank moves to rein in inflation could tip economies into recession.
The Philippine Stock Exchange Index dropped 25.38 points, or 0.4 percent, to 6,686.83 on a value turnover of P5 billion. Losers beat gainers, 100 to 73, with 53 issues unchanged.
BDO Unibank Inc. of the Sy Group, the biggest lender in terms of assets, fell 2.9 percent to P128.10, while Noodles maker Monde Nissin Corp. declined 2.5 percent to P13.98.
Globe Telecom Inc. of the Ayala Group, the second-largest telecommunications firm, decreased 2.2 percent to P2,350, but DMCI Holdings Inc. of the Consunji Group rose 2.1 percent to P9.18.
The rest of Asian equities also fell on rising concerns on inflation.
However, price pressures were eased by a more than two percent drop in crude following a report saying Saudi Arabia had indicated it was willing to pump more if Russia was unable to fulfill pledges to boost production.
Having enjoyed a healthy start to the week, markets are again on the back foot owing to bank policymakers’ plans to tighten their belts to prevent inflation running out of control.
The Bank of Canada ramped up its key lending rate by half a percentage point Wednesday and warned of further tough measures down the line as energy and food costs spike.
The move came as several top Federal Reserve officials said they were in favor of similar increases in the United States. Wednesday also saw the central bank begin to offload its vast bond holdings that were bought as part of its quantitative easing program to bring rates down to near zero.
Now observers fear that the increasingly hawkish moves by finance heads—combined with China’s lockdown-induced weakness and the Ukraine war—will cause economies to contract.
“We do see the rise in probability of a recession in the second half of this year, potentially persisting into 2023 as the Fed continues to battle inflation,” Tracie McMillion, of Wells Fargo Investment Institute, told Bloomberg Television.
She added that traders may not have completely taken into account the Fed’s balance sheet reduction.
“The impact of quantitative tightening starting to roll off the Fed’s balance sheet this month is really untested and unprecedented. Our guess is that it’s probably not fully priced into markets,” she said.
After a weak lead from Wall Street, Asia was mostly in negative territory. Hong Kong shed one percent, while Tokyo, Sydney, Seoul, Singapore, Wellington, Jakara and Taipei were also well down. Shanghai and Mumbai edged up.
Concern over the outlook was shared by Wall Street titan Jamie Dimon, who warned that the wave of unprecedented crises were combining to cause an economic superstorm.
“That hurricane is right out there down the road coming our way,” the JPMorgan Chase & Co boss said. “We don’t know if it’s a minor one or Superstorm Sandy. You better brace yourself.”
However, in sign of the huge uncertainty coursing through markets, a top strategist at the bank, Marko Kolanovic, painted a more positive picture, forecasting a market recovery through 2022. With AFP