LOCAL SHARES dropped on Tuesday as investors were cautious as the US and China slapped new tariffs on each other’s goods in an escalation of ongoing trade tensions between the world’s largest economies.

The 30-member Philippine Stock Exchange index (PSEi) went down 142.03 points or 1.8% to close at 7,747.38. The broader all-shares index also declined 63.58 points or 1.33% to 4,706.80

“Looks like the index chose to react instead to the drastic US market drop last Friday night, instead of the small recovery we saw last night,” Papa Securities Corp. Sales Associate Gabriel Jose F. Perez said in an e-mail on Tuesday, adding that the rebalancing of MSCI and outflows also affected Tuesday’s session.

Foreigners were net sellers for the fifth straight session on Tuesday, with net outflows reaching P1.58 billion, up from Friday’s P539.13 million.

US stocks rose more than 1% on Monday after US President Donald Trump predicted a US-China trade deal following remarks by Vice Premier Liu He, who has been leading the talks with Washington, that China was willing to resolve their dispute through “calm” negotiations.

The Dow Jones Industrial Average rose 269.93 points or 1.05% to 25,898.83; the S&P 500 gained 31.27 points or 1.10% to 2,878.38; and the Nasdaq Composite added 101.97 points or 1.32% to 7,853.74.

On Friday, the S&P 500 tumbled 2.6% after Mr. Trump announced an additional duty on some $550 billion of Chinese goods in retaliation for Beijing’s announcement of more tariffs of its own earlier that day.

Concerns about the global economy slipping into recession and uncertainty over the pace of US interest rate cuts have created some anxiety about how long the current US expansion will last.

On the other hand, AAA Southeast Equities, Inc. Research Head Christopher John Mangun said the performance of the index yesterday was affected by massive losses across-the-board.

“More than half a dozen blue chips ended with losses more than 2% today which obliterated the gains that we saw last week. However, it did end the day right around its 7,750 support level. There is the possibility that we might see a bounce tomorrow but in case we don’t, the next support level is at 7,630,” he said in an e-mailed response on Tuesday.

All counters ended in red expect for the mining and oil sub-sector, which gained 1.45% or 117.54 points to end at 8,191.54.

Leading the losers was the holding firms counter, which went down 1.95% or 152.04 points to 7,620.50. Financials followed as the sector fell 1.91% or 35.03 points to 1,792.09; property declined 1.85% or 74.39 points to 3,942.30; services gave up 1.36% or 21.75 points to close at 1,568.14; and industrials lost down 0.82% to 90.42 points to end at 10,906.58.

Some 2.59 billion issues valued at P13.47 billion switched hands on Tuesday, higher than Friday’s P8.16-billion turnover.

Losers outnumbered advancers, 124 to 88, while 39 names closed unchanged. — V.M.P. Galang with Reuters