RALLY. Philippines' stocks gauge rises anew on Wednesday (July 6, 2022) due in part to the decline in US' 10-year Treasury yield. However, the peso weakened against the US dollar because of the strengthening of the greenback. (PNA file photo)
MANILA – The rally of United States stocks overnight boosted the local stock barometer on Wednesday, but the peso depreciated against the US dollar.
The Philippine Stock Exchange index (PSEi) rose by 2.14 percent, or 135.02 points, to 6,445.01 points.
All Shares followed with a jump of 1.30 percent, or 44.20 points, to 3,442.90 points.
Most of the sectoral gauges also gained during the day, led by the Holding Firms index after it rose by 3.75 percent.
It was trailed by Industrial, 2.18 percent; Services, 1.69 percent; Property, 1.28 percent; and Financials, 0.03 percent.
Only the Mining and Oil index shed during the day after it fell by 1.42 percent.
Volume was thin at 915.72 million shares amounting to PHP5.32 billion.
Advancers led decliners at 114 to 71, while 47 shares were unchanged.
Luis Limlingan, Regina Capital Development Corporation (RCDC) head of sales, said falling US bond yields helped growth stocks.
This, after the 10-year US Treasury yield fell below the two-year yield on Tuesday, which he said is “a move that has a strong historical track record as a recession indicator.”
“The so-called yield curve inversion has historically been a warning sign that the economy may be falling or has already fallen into recession,” he said, referring to the US economy.
He said investors will also be watching for, among others, the release of the minutes of the Federal Open Market Committee (FOMC) meeting last June, as well as the latest Mortgage Bankers Association’s mortgage purchasing index.
Meanwhile, the local currency finished the day at 55.67 against the US dollar, its weakest since closing at 55.71 on Oct. 20, 2005, and down from its 55.23 end a day ago.
It opened the day at 55.42, a big slide from its 55.00 start in the previous session.
It traded between 55.42 and 55.72, bringing the day’s average of 55.574.
Volume reached USD1.25 billion, lower than the previous day’s USD1.29 billion.
Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort, in a reply to questions from the Philippine News Agency, traced the peso’s depreciation partly to the strengthening of the US dollar and risk aversion for fears about the possibility of a US economic recession.
He said projections for further increases of the Federal Reserve’s key rates to help tame the four-decade high US inflation rate also contributed to investors’ worries.
Ricafort said these factors, however, are countered by the drop in oil prices in the international market to below USD100 per barrel and the similar development for other commodities “as the markets already pricing in the risk of a possible US economic slowdown or even recession; thereby could help reduce the country’s imports of oil and other major global commodities.”
He said the rally in the local bourse also cushioned the negative impact on the peso.
Ricafort forecasts the currency pair to trade between 55.50-55.75 on Thursday. (PNA)
