Wall Street gains, Treasury yields rise as inflation picks up steam


FILE PHOTO: Traders work as a screen shows Federal Reserve Chairman Jerome Powell's news conference after the U.S. Federal Reserve interest rates announcement on the floor of the  NYSE in New York
FILE PHOTO: Traders work, as a screen shows Federal Reserve Chairman Jerome Powell’s news conference on the floor of the New York Stock Exchange (NYSE) in New York, U.S., October 30, 2019. REUTERS/Brendan McDermid/File Photo

April 9, 2021

By Stephen Culp

NEW YORK (Reuters) – Wall Street gained ground on Friday after solid U.S. inflation data and an uptick in Treasury yields suggested the economic recovery from the pandemic recession was gaining momentum.

All three major U.S. stock indexes were on track to post weekly gains as upbeat economic data boosted risk appetite ahead of first-quarter earnings.

Transports, seen as a proxy for economic health, were on track for their 10th straight weekly advance.

“It’s a nice end to a good week,” said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina. “The rise in transports is a good sign that the economy is beginning to open up.”

A Labor Department report showed producer prices rose last month at twice the speed of February’s growth, reviving some inflation worries.

“No question we’re seeing prices increase at the producer level and the big question is when that transfer down to the consumer?” Detrick added. “The Fed has stressed from the very beginning these increases will be transitory.”

Indeed, U.S. Federal Reserve Chairman Jerome Powell offered assurances on Thursday that the central bank is far more concerned about the recent uptick in COVID-19 infections than inflationary pressures.

The Dow Jones Industrial Average rose 148.06 points, or 0.44%, to 33,651.63, the S&P 500 gained 12.84 points, or 0.31%, to 4,110.01 and the Nasdaq Composite added 9.11 points, or 0.07%, to 13,838.42.

European stocks ended nominally higher, but marked their longest winning streak since November 2019 on rising hopes of a rapid economic rebound.

The pan-European STOXX 600 index rose 0.08% and MSCI’s gauge of stocks across the globe gained 0.05%.

Emerging market stocks lost 1.02%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.85% lower, while Japan’s Nikkei rose 0.20%.

U.S. Treasury yields rose in the wake of the PPI report, which provided further evidence that the world’s largest economy was on a stable road to recovery from the pandemic.

Benchmark 10-year notes last fell 10/32 in price to yield 1.6656%, from 1.632% late on Thursday.

The 30-year bond last fell 13/32 in price to yield 2.3418%, from 2.322% late on Thursday.

The dollar was up against a basket of world currencies as inflation date lifted bond yields, but the greenback appeared set for its softest week of the year on upbeat economic data and the dovish Fed.

The dollar index rose 0.11%, with the euro down 0.11% to $1.1899.

Graphic: Dollar set for worst week of the year https://fingfx.thomsonreuters.com/gfx/mkt/yxmpjdobbpr/dollar0904.png

The Japanese yen weakened 0.38% versus the greenback at 109.68 per dollar, while Sterling was last trading at $1.3712, down 0.15% on the day.

Crude oil prices dipped on rising supply amid a mixed picture on demand recovery from the COVID slump.

U.S. crude dipped 0.47% to settle at $59.32 per barrel, while Brent crude settled at $62.95 per barrel, falling 0.4% on the day.

Gold withdrew from Thursday’s one-month peak, weighed down by a rebounding dollar and rising Treasury yields. Still, the safe-haven metal appears headed for its first weekly gain in three.

Spot gold dropped 0.8% to $1,742.08 an ounce.

(Reporting by Stephen Culp; additional reporting by Carolyn Cohn; Editing by David Gregorio)



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Market heading for fifth day of gains


The market has hit its fifth day of gains and is sitting around 3 per cent lower than it was mid-February last year with the economy expected to recover fully by next week, according to InvestSmart Chief Market Strategist Evan Lucas.

“The way we’re going, we’re going to get there probably mid next week and nothing seems to be slowing it down despite the fact there are some hesitations,” he told Sky News.

Mr Lucas said even though JobKeeper had ended and around 100,000 people had lost their jobs it did not affect the market as the support systems and low interest rates remain.

“Everything in the market at the moment is to the upside because everything we hear at the moment is that the economy is not only good, it’s growing, and the support in the economy from things like central banks is not going to be taken away any time soon.”

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ASX set for gains as Wall Street advances; Powell set to speak


Stocks are mixed on Wall Street on Wednesday (US time) as another surge in bond yields caused big declines in technology stocks. Investors are cautiously awaiting remarks from Federal Reserve chair Jerome Powell, who is expected to speak later in the day on inflation and what the central bank may do to combat it.

In mid-afternoon trade, the S&P 500 is 0.1 per cent higher, the Dow Jones is up 0.5 per cent while the technology-heavy Nasdaq Composite was down 0.2 per cent.

Markets will be glued to Powell’s comments.Credit:AP

The ASX is set for a positive start to its session, with futures at 5.10am AEDT pointing to a gain of 16 points, or 0.2 per cent, at the open.

Bond yields moved upward again, after being relatively stable for more than a week. The yield on the 10-year US Treasury note hit 1.67 per cent versus 1.62 per cent the day before. It’s now the highest since January 2020.

Rising bond yields gave banks a boost. They rely on higher rates to charge more lucrative interest on loans. Wells Fargo rose 1 per cent. Industrial stocks also made solid gains, with Caterpillar rising 2.6 per cent.

“What we’re seeing is very much aligned with what you would expect in a recovery trade,” said Brian Levitt, global market strategist at Invesco. “We were coming from pretty beaten up places.”

Investors are betting big that the economic malaise will dissipate as spring arrives and more Americans get vaccinated against the coronavirus. The $US1400 ($1802) stimulus checks the Biden administration began sending to individuals last weekend is also helping. But faster economic activity could also translate into some degree of inflation.

Investors are awaiting the Federal Reserve’s economic and interest rate projections, expected later in the day. Economists expect Powell will try to convince jittery financial markets that the central bank can continue providing support without igniting inflation. Those worries have recently pushed bond yields higher.

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Nifty today: SGX Nifty gains 14 points; here’s what changed for market while you were sleeping


Domestic stocks may take a breather after rallying in the previous two sessions, thanks to mixed signals from other Asian markets. All eyes would be on the Rs 596 crore MTAR IPO opening today.

Here’s the breaking down of the pre-market actions:

State of Markets

SGX Nifty signals positive start

Nifty futures on the Singapore Exchange traded 14 points, or 0.09 per cent, higher at 14,997 in signs that Dalal Street was headed for a positive start on Wednesday.

Tech View: Nifty hurdle at 20-DMA

Nifty50 on Tuesday climbed over 1 per cent and settled above the 14,900 mark. The index formed a bullish candle on the daily chart, with a long lower wick, suggesting that every intraday selling got bought into. Analysts said the 15,000 level will be a key hurdle for Nifty50 to watch out for.

Asian shares mixed in early trade

Asian shares were trading mostly mixed on Wednesday. Japan’s Nikkei fell 0.18 per cent to 29,355.64.China’s Shanghai Composite rose 0.42 per cent to 3,523.20. Hong Kong’s Hang Seng climbed 1.13 per cent to 29,425. Korea’s Kospi edged 0.3 per cent lower.

US stocks settled lower

Stocks closed lower on Wall Street after a wobbly day, giving back some of their big gains from a day earlier. The S&P 500 fell 31.53 points to 3,870.29. The Dow Jones Industrial Average lost 143.99 points, or 0.5 per cent, to 31,391.52. The tech-heavy Nasdaq composite dropped 230.04 points, or 1.7 per cent, to 13,358.79.

MTAR IPO to hit market today

The Rs 596 crore IPO by a precision engineering company MTAR Technologies hit the market today. On Tuesday, the company raised Rs 178.92 crore from 15 anchor investors at Rs. 575 per share including Nomura Funds Ireland, Jupiter South Asia Investment, White Oak Capital and Goldman Sachs India.

FIIs buy Rs 2,223 crore worth stocks

Net-net, foreign portfolio investors (FPIs) were buyers of domestic stocks to the tune of Rs 2,223 crore, data available with NSE suggested. DIIs were net sellers to the tune of Rs 854 crore, data suggests.

Money markets

Rupee: The rupee rose by 18 paise to close at 73.37 against the US dollar on Tuesday, ending its three-day losing streak on the back of gains in domestic equities amid improving risk appetite.

10-year bonds: India 10-year bond yield rose 0.43 per cent to 6.23 after trading in 6.18-6.23 range.

Call rates: The overnight call money rate weighted average stood at 3.21 per cent, according to RBI data. It moved in a range of 1.90-3.50 per cent.

Data/events to watch

  • India Markit Services PMI Feb (10:30 am)
  • US Total Vehicle Sales Feb (05:30 am)
  • Japan Jibun Bank Services PMI Final Feb (06:00 am)
  • China Caixin Services PMI Feb (07:15 am)
  • Euro Area Markit Services PMI Final Feb (02:30 pm)
  • UK Markit/CIPS UK Services PMI Final Feb (03:00 pm)
  • UK Budget 2021 (06:00 pm)

Macros

RBI intervenes to arrest rupee slide… RBI is said to have intervened lately in the currency market to arrest the rupee’s slide that, many believe, owes more to speculative trade than the business fundamentals of a fast-reviving economy. The central bank is reportedly selling dollars on a large scale after nearly three quarters to stem the local unit’s value erosion, dealers said. The rupee ended a three-day losing streak, climbing 18 paise to 73.37 to a dollar. Since February 25, the day before the US Treasury benchmark hit a recent high of 1.62%, the rupee has lost nearly 1.5% to the dollar.

NBFCs, HFCs told to check money laundering… RBI has asked several NBFCs, housing finance companies and co-operative banks to get their house in order over the anti-money laundering monitoring mechanism and risk-based assessment, two people with knowledge of the matter said. The central bank has raised concerns around these mechanisms for at least 50 entities, and asked them to complete these tasks by the end of March.

S&P red-flags Covid spike… Global ratings agency S&P is closely monitoring the recent spike in Covid-19 cases in India and the reimposition of restrictions on movement and behaviour, Andrew Wood, its director of sovereign and international public finance ratings, said. The agency raised concerns over the potential cooling impact the resurgence in cases could have on India’s economic recovery if it turned into a more broad-based trend.

India’s exports dipped in Feb… India’s exports dipped 0.3% to $27.7 billion, largely due to lower global oil prices, while imports rose 7% to $40.6 billion, resulting in a higher trade deficit. Preliminary numbers released by the commerce department on Tuesday estimated trade deficit at $12.9 billion, compared to $9.9 billion in the corresponding period last year, but a tad lower than January 2021 level of $14.5 billion.

Spectrum sale fetches govt Rs 78K cr… India’s first spectrum auction in five years ended on day two, with the government mopping up ₹77,814 crore. The government will get ₹19,000-20,000 crore in upfront payment this month, and around ₹10,000 crore in the next fiscal. Reliance Jio, which faced a mustbuy situation in18 circles to ensure continued service, bid for 488.35 MHz of bandwidth worth ₹57,122.65 crore, and accounted for 73% of the total auction proceeds. Bharti Airtel bought 355.45 MHz of spectrum for ₹18,698.75 crore, and Vodafone Idea, financially the weakest of the three private telcos, paid ₹1,993.40 crore to buy 11.8 MHz of airwaves across five circles.

FMCG firms eye online-only brands… Large, traditional fast-moving consumer goods (FMCG) companies such as Nestle, Reckitt Benckiser, Wipro Consumer Care, Marico and Tata Consumer said they are intensifying focus on online-only brands and businesses. They are either setting up dedicated venture funds or investing in smaller startups that sell through online channels to consumers in response to ecommerce sales doubling and niche, evolving categories that emerged amid the pandemic.



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Americans Made Big Wage Gains Under Trump


Average wages rose sharply in 2019 in then-President Donald Trump’s go-go economy and also rose again in 2020 as China’s coronavirus pushed many lower-income people out of jobs, according to the left-leaning Economic Policy Institute (EPI).

The spikes reveal the Trump gains at the 2019 end of the EPI chart, released February 24 in the group’s annual “The State of Working America 2020 wages report.”

Source: Economic Policy Institute

“Men at the middle and bottom of the wage distribution saw their wages rise in 2019: a 2.6% increase at the 50th percentile and a striking 5.7% increase at the 10th percentile, along with a 4.2% increase at the 20th percentile,” according to the organization’s 2019 yearly report, The State of Working America 2019.”

Wages rose rapidly during the 2020 coronavirus crash, in large part because many lower-wage workers lost their jobs and were pushed out of the annual wage calculations. The new report says:

Wages grew [in coronarivus year 2020] largely because more than 80% of the 9.6 million net jobs lost in 2020 were jobs held by wage earners in the bottom 25% of the wage distribution. The exit of 7.9 million low-wage workers from the workforce, coupled with the addition of 1.5 million jobs in the top half of the wage distribution, skewed average wages upward. [Emphasis added]

Pro-migration progressives control the EPI, so the reports typically ignore the wage-cutting impact of labor inflation caused by the arrival of millions of legal and illegal blue-collar and white-collar migrants.

But the group also provides much useful information about slow wage growth since 1990 when President George H.W. Bush and Sen. Ted Kennedy collaborated to double legal immigration and dramatically expand white-collar visa workers.

The inflated supply of workers, consumers, and renters helped employers pocket the huge gains from routine productivity increases. That economic transfer spiked the stock market for investors and also pushed many states toward Democrat dominance.

Source: Economic Policy Institute

The EPI’s data echoes other reports.

“Families near the bottom of the income and wealth distributions generally continued to experience substantial gains in median and mean net worth between 2016 and 2019,” says a September 2020 report by the Federal Reserve banking system. The report, titled “Changes in U.S. Family Finances from 2016 to 2019: Evidence from the Survey of Consumer Finances,” said:

During the three years between the beginning of the 2016 and 2019 surveys, real gross domestic product grew at an annual rate of 2.5 percent, and the civilian unemployment rate fell from 5.0 percent to 3.8 percent.

Families at the top of the income and wealth distributions experienced very little, if any, growth in median and mean net worth between 2016 and 2019 after experiencing large gains between 2013 and 2016 [during the Obama administration].

The report notes that college graduates did poorly from 2016 to 2019. The family median income level of high school graduates rose by six percent, while the median or midpoint income of college graduates fell by two percent, according to the report.

The 2019 wage gains were also aided by raises in minimum wages in many states. The enforced wage gains did cut jobs because the economy was booming, and Trump largely blocked business demands for more legal immigration.

In January 2021, a construction industry CEO lamented that Trump’s deputies forced him to hire Americans instead of illegal aliens. Stan Marek, the owner of Marek Brothers, a Houston-based construction firm that has employed many illegal migrants, complained:

They were let go because of ICE [Immigration and Customs Enforcement] audits or Social Security No Matches, or insurance audits or whatever, and yet they’re 11 to 12 million people in this country on payrolls sending in about $6 to $7 billion a year of Social Security [payments] that they would never get. These ICE audits have taken millions of people off of payrolls and dumped them into the underground economy where they’re working for cash and not paying taxes.

In 2020, many business groups lined up behind Joe Biden partly because of his promise to dramatically accelerate the inflow of migrants in the United State’s consumer economy.

For years, a wide variety of pollsters have shown deep and broad opposition to labor migration and the inflow of temporary contract workers into jobs sought by young U.S. graduates.

The multiracial, cross-sex, non-racist, class-based, intra-Democratic, and solidarity-themed opposition to labor migration coexists with generally favorable personal feelings toward legal immigrants and toward immigration in theory — despite the media magnification of many skewed polls and articles that still push the 1950’s corporate “Nation of Immigrants” claim.

The deep public opposition is built on the widespread recognition that migration moves money from employees to employers, from families to investors, from young to old, from children to their parents, from homebuyers to real estate investors, and from the central states to the coastal states.

However, Biden’s officials have been broadcasting their desire to change border policies to help extract more migrants from Central America for the U.S. economy. On February 19, for example, deputies of DHS Secretary Alejandro Mayorkas posted a tweet offering support to migrants illegally working in the United States and to migrants who may wish to live in the United States.



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The Australian property market is booming but the gains are based on ‘massive’ debts | Housing



The Australian housing market is going gangbusters and all the signs are the boom is here to stay.

When property data firm CoreLogic tracked 1,191 auctions last weekend, it found 86.1 per cent of properties that went under the hammer sold, a 2.3 per cent increase on the week before.

The company’s head of research, Tim Lawless, says it is a result not seen since 2015.

“When auction clearance rates are high, you expect house prices to be rising and vice-versa,” Lawless said. “At the moment we’re seeing clearance rates well above 80 per cent. The last time we saw the same was in 2015, but you have to go back a decade to see auction markets as strong as this.”

House prices continued to grow strongly through January with CoreLogic’s Home Value Index recording price growth of 0.9 per cent nationally and regional areas growing at rates double that recorded in cities.

Nerida Corisbee, chief economist at global real estate company REA Group, said the situation was driven by a combination of cheap money, a high savings rate among those who held onto a job through 2020, a receding pandemic and an exodus from densely populated cities into regional areas.

“You’re watching a realignment as people work out where they want to live and where they want to be employed,” Corisbee said.

“The recession we saw with the pandemic is not quite like what we’ve seen elsewhere in the GFC where it was finance-led. What that’s meant for property is there’s no shortage of money. Interest rates are at incredible lows and those who had jobs were forced to save during rounds of lockdowns.”

However, while property values in regional areas like south Queensland and northern New South Wales have been growing, Corisbee said units and apartments in city areas have remained flat thanks to lower migration.

“When you have a look across Australia, you’re seeing price growth everywhere, but at a suburban level, particularly those closer to universities, rents have dropped and values have dropped,” she said.

The activity comes off record low interest rates of 0.1 per cent, a situation the Reserve Bank of Australia (RBA) expects to hold until 2024.

RBA governor Philip Lowe shrugged off any concerns that the country may be facing the start of a new housing bubble earlier this month, saying the growth was good news for an economy recovering in the wake of the pandemic.

“There’s a lot of focus at the moment on the fact that housing prices are rising again, and the stock market has been strong,” Lowe said. “Well, the national house price index today is where it was four years ago … and the equity market, we’re back to where we were at the beginning of last year.”

Other key factors include the government’s pandemic response plan.

To date, around 82,000 homeowners have subscribed to the homebuilder scheme at a cost of $2 billion, while other initiatives like the cash-flow boost program directly injected sums up to $100,000 into small-to-medium businesses earning less than $50m a year.

Prof Hal Pawson from the University of New South Wales said this “cheap money” has been a big driver in the recent price spike – and one that may prove disadvantageous to renters and those living in regional areas.

“Cheap money is the most important thing by far,” Pawson said.

“It’s the ability to take out $150,000 more on a mortgage than you could have had a year ago on the same salary. The concern about this is that, for lower income earners in regional locations, they’re going to be put under pressure as the result of these changes and it doesn’t flow through [to renters] immediately.”

The federal government is looking to boost the situation further by winding back responsible lending laws, Martin North, the principal of Digital Finance Analytics, said. The gains were not without risk as they relied on the “massive” creation of new debts, he added.

“Scott Morrison said three years ago he wouldn’t let prices drop and that is proving to be true, but we’re building these rises off the back of massive debts.

“Banks are lending six or seven times average incomes. They’re doing what they were doing before the royal commission. This is an unsustainable and a highly risky extension when we should be investing in more sustainable or longer-term solutions.”

Dr Cameron Murray, a post-doctoral fellow at the Henry Halloran Trust at the University of Sydney, said what is happening in Australia has to be seen in a global context.

Even without the pandemic, he says, the world is experiencing a global housing boom, while central banks everywhere have come to view the housing market – and the associated consumer spending – as a key plank of their economies.

“Our macro-stabilisation policy works by juicing house prices,” Murray said.

“This is a policy most central banks have adopted. Secondly, we’re just at that point in the cycle. The best parallel to the situation now is 2004. I think we’re in a very similar phase right now. Sydney boomed early, then it tapered off. Then the rest of the country shot up for four years in line with the broad global house price cycle.

“The economy runs in cycles and a lot of regional Australia hasn’t been through that boom cycle. Now it’s their turn.”

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ASX eyes gains despite mixed Wall Street session


Stocks wobbled between small gains and losses in afternoon trading on Tuesday (US time), after the major stock market indexes hit record highs the day before. Investors continue to keep their eyes on Washington, where it appears Democrats plan to move ahead without Republican help on a major stimulus bill for the economy.

In early afternoon trade, the S&P 500 index was flat, the Dow Jones Industrial Average has inched 0.1 per cent higher and the Nasdaq has added 0.3 per cent. A slight pullback after six straight days of gains is not uncommon, as investors pause during a rally to reassess and wait for more economic data to see where the market goes next.

Wall Street’s winning streak is in danger.Credit:AP

Despite the soft lead, the Australian sharemarket is set for gains, with futures at 4.51am AEDT pointing to a rise of 17 points, or 0.3 per cent, at the open.

The S&P 500 was nearly evenly split between gainers and losers, with communications companies rising the most. A mix of companies that deal with consumer services and products were the biggest drag on the broader market.

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ASX to dip, amid Wall Street, oil and bitcoin gains



Welcome to the Trading Day blog for Tuesday, February 9. Australian stocks are poised to edge lower at the open, even as US stocks looked set extended their winning streak. Earnings season steps up with results expected from Suncorp, Boral and Challenger, among others, while Macquarie holds an investor briefing.

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Gold gains Rs 117; silver jumps Rs 541


Gold prices rose by Rs 117 to Rs 48,332 per 10 grams in the national capital on Monday with recovery in international prices and rupee depreciation, according to HDFC Securities.

In the previous trade, the precious metal had closed at Rs 48,215 per 10 grams.

Silver also jumped by Rs 541 to Rs 64,657 per kg from Rs 64,116 per kg in the previous trade.

The rupee depreciated by 21 paise to 73.28 against the US dollar on Monday.

In the international market, both gold and silver were trading in the green at USD 1,834 per ounce and USD 25 per ounce respectively.



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Stocks decline further as investors pocket gains


COURTESY OF PHILIPPINE STOCK EXCHANGE, INC.

By Revin Mikhael D. Ochave, Reporter

THE MAIN INDEX closed lower on Wednesday, extending its decline to a second day, as investors booked profits from the local market’s heavyweights.

The benchmark Philippine Stock Exchange index (PSEi) fell 15.26 points or 0.21% to end at 7,242.85, while the broader all shares index dropped 2.83 points or 0.06% to 4,334.93.

Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a mobile phone message that the market ended lower as investors pocketed their gains on index heavyweights such as Ayala Corp. (AC), Ayala Land, Inc. (ALI), and JG Summit Holdings, Inc.

On Wednesday, shares in AC fell P21.50 or 2.56% to end at P818.50 apiece; ALI stocks declined P1.05 or 2.53% to close at P40.40 each; and stocks of JG Summit lost 30 centavos or 0.41% to end at P72 per share.

“Funds went more into second liners and speculative stocks allowing the overall market to have a positive breadth,” Mr. Tantiangco said.

Advancers bested decliners yesterday, 131 against 105, while 37 names ended unchanged.

AAA Southeast Equities, Inc. Research Head Christopher John Mangun said the market closed lower as investors were on a “wait and see” mode.

“Volatility on blue chips continues to die down while second and third liners remain extremely active. Investors are waiting until economic activity can justify current blue chip valuations before buying any higher,” Mr. Mangun said in an e-mail.

“The main index has stalled every time it climbed above 7,200. There is still a lot of uncertainty and we will not see the market go higher until we see more good news,” he added.

Finance Secretary Carlos G. Dominguez said at a virtual meeting of the Management Association of the Philippines (MAP) on Tuesday that preliminary data showed the national government’s budget deficit reached P1.36 trillion or around 7.5% of the country’s gross domestic product.

Majority of sectoral indices finished lower on Wednesday, except for mining and oil, which rose 207.83 points or 2.13% to 9,954.71, and financials, which improved 21.99 points or 1.49% to 1,490.08.

Meanwhile, property retreated 43.65 points or 1.16% to 3,695.47; industrials declined 42.63 points or 0.44% to 9,546.44; services went down 2.61 points or 0.16% to 1,538.85; and holding firms lost 11.46 points or 0.15% to 7,413.42.

Value turnover reached P9.17 billion on Wednesday with 17.08 billion issues switching hands, lower than the P9.74 billion with 41.52 billion issues seen in the previous trading session.

Net foreign selling amounted to P220.06 million yesterday, higher than the P25.03 million worth of net outflows logged on Tuesday.








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