Stocks at 2-year low as global recession fears intensify

MANILA, Philippines — Global shares sank to two-year lows yesterday, hammered by spiraling borrowing costs that intensified fears of a global recession and sent investors into the arms of the safe-haven dollar.

At the Philippine Stock Exchange, the main index PSEi fell for the fifth straight session, losing 140.39 points or 2.33 percent to close at 5,879.68, its lowest level in nearly two years.

The broader All Shares index dropped by 68.59 points or 2.12 percent to end at 3,165.64.

“Philippine shares continued falling on climbing rates and global recession fears with other regional indexes falling deeper into the bear market,” said Luis Limlingan of Regina Capital.

A total of P6.789 billion worth of shares changed hands yesterday, with losers dominating gainers, 156 to 49, while 39 issues were unchanged.

Central banks around the world have jacked up interest rates in the last week and said they would do whatever it takes to fight red-hot inflation, particularly as the northern hemisphere winter risks exacerbating a global energy crunch.

“It is now clear that central banks in advanced economies will make the current tightening cycle the most aggressive in three decades,” said Jennifer McKeown, head of global economics at Capital Economics.

“While this may be necessary to tame inflation, it will come at a significant economic cost.

“In short, we think the next year will look like a global recession, feel like a global recession, and maybe even quack like one, so that’s what we’re now calling it.”

Shaking investor confidence has been the collapse in sterling and UK bond prices, which could force some fund managers to sell other assets to cover losses.

The safe-haven dollar has been a major beneficiary from the rout in sterling, rising to a fresh 20-year peak of 114.680 against a basket of currencies.

The dollar also touched a record high on the offshore-traded Chinese yuan at 7.2387, having risen for eight straight sessions.

The mounting pressure on emerging market currencies from the dollar’s rise is in turn adding to risks that those countries will have to keep lifting interest rates and undermine growth.