US-Iran conflict to keep market sentiment wary

PHILIPPINE SHARES may move sideways this week as investors continue to await news of progress in negotiations between the United States and Iran as the Middle East conflict drags on.

On Friday, the Philippine Stock Exchange index (PSEi) fell by 1.06% or 64.56 points to close at 5,999.13, while the broader all shares index went down by 0.7% or 24.03 points to end at 3,374.78.

Week on week, the bellwether index dropped by 99.08 points from its April 10 finish of 6,098.21.

“The market retreated as early recovery attempts resulting from sequel US-Iran talks and Israel-Lebanon’s 10-day ceasefire were doused by supply pressure Friday. Investors remain concerned over heightened risks from an uncertain geopolitical terrain,” online brokerage 2TradeAsia.com said in a note.

“Investors took profits after a two-week rally, causing the local market to pull back last week. This shows that investors are still moving with caution as economic risks remain due to the war in the Middle East,” Philstocks Financial, Inc. Research Manager Japhet Louis O. Tantiangco said in a Viber message. “While ceasefire agreements spark hopes of negotiations, investors are also aware that tensions may still reignite.”

For this week, Mr. Tantiangco said the market could move higher on news amid the reported progress in the US-Iran talks.

“Positive developments, primarily ones pointing to a deal between the US and Iran, are expected to drive the local market higher. However, lack of such, more so a deterioration of the situation between the two, is expected to bring the market lower.”

However, the market remains bearish, as shown by PSEi’s slide back below the 6,000 mark, he said.

For its part, 2TradeAsia.com put the PSEi’s immediate support at 5,800, resistance at 6,050, and secondary resistance at 6,300.

“We anticipate sustained pressure on the peso, a weakened government balance sheet, and a slowdown in remittances due to Middle East concentration risk. With runaway inflation pressures keeping interest rates elevated, the risk of stagflation is high,” it said.

Iran’s top negotiator said recent talks with the US had made progress but gaps remained over nuclear issues and the Strait of Hormuz, while President Donald J. Trump cited “very good conversations” with Tehran despite warning against “blackmail” over the key shipping channel, Reuters reported.

Neither side offered any specifics about the state of negotiations on Saturday, days before a fragile ceasefire in the US-Israeli war against Iran is set to expire.

The war, now in its eighth week, has killed thousands, spread to Israeli attacks in Lebanon and sent oil prices surging because of the de facto closure of the strait, which before the war carried one-fifth of the world’s oil shipments.

Tehran reversed course on Saturday to reassert control over the strait, again closing the energy choke point and adding fresh uncertainty to the war, which the US and Israel launched on Feb. 28. — Alexandria Grace C. Magno with Reuters