Stocks slide as recession fears curb risk appetite

MANILA, Philippines — Local stocks followed most Asian equities lower in directionless trading yesterday after softening US data and renewed banking sector concerns fanned fears of a recession and dampened risk appetite.

The benchmark Philippine Stock Exchange index (PSEi) closed lower at 6,540.24, down by 53.15 points or 0.81 percent, while the broader All Shares gauge slipped to 3,492.26, down by 14.53 points or 0.41 percent.

Most of the sectors were down, except for mining and oil and services.

A total of P5.447 billion worth of shares changed hands, with declining stocks slightly outnumbering advancers, 101 to 95, while 47 issues were unchanged.

Chief economist Michael Ricafort of Rizal Commercial Banking Corp. said the downward correction in the market was largely in line with the overnight declines in the US stock markets to new two-week lows, and after mostly softer-than-expected US economic data such as consumer confidence, home prices, manufacturing gauges, among others that could indicate risk of US recession.

Traders likewise weighed in on the central bank governor’s pronouncements that  the Bangko Sentral ng Pilipinas aims to maintain its interest rate differential with the Fed and considers it “dangerous” to cut interest rates faster than the Fed.

Elsewhere in Asia, investors turned to safe-haven assets after US consumer confidence dropped to a nine-month low in April, further heightening the risk that the economy could fall into recession this year.

Meanwhile, reports of First Republic Bank considering asset sales after disclosing a $100 billion plunge in deposits for the quarter stoked fresh banking sectors worries and further hurt investor sentiment.

Investor attention is also on major central bank meetings, with the Bank of Japan’s policy decision due on Friday and the US Federal Reserve meeting next week.

Markets are now pricing in a 76 percent chance for the Fed to deliver a 25 basis point (bps) rate hike, according to CME FedWatch, down from 90 percent at the start of the week.