PHILIPPINE SHARES declined on Tuesday amid growing tensions between Russia and the Ukraine and fears of potentially aggressive US Federal Reserve rate hikes.

The bellwether Philippine Stock Exchange index (PSEi) slid 51.21 points or 0.69% to close at 7,309.94, while the broader all shares index dropped 32.74 points or 0.84% to end at 3,860.20.

“With index rebalancing trades out of the way, we finally saw the PSEi react to the bad news happening abroad in a meaningful way. In particular, the Ukraine developments over the weekend and the hawkish comments from the US Fed last night were today’s big drivers,” AAA Southeast Equities, Inc. President William M. Cabangon said in a Viber message on Tuesday.

A Russian invasion of Ukraine is highly likely, could be imminent and would pose a threat to Europe’s wider stability that emboldens aggressors around the world, Britain’s Foreign Secretary Liz Truss said on Tuesday, Reuters reported.

Russia has more than 100,000 troops massed near the border of Ukraine. Russian political leaders deny Western accusations that it is planning to invade, but say it could take unspecified “military-technical” action unless a range of demands are met, including barring Kyiv from ever joining the NATO alliance.

Oil prices surged over 2% on Monday to their highest in more than seven years as Ukraine’s president declared a “day of unity” for Feb. 16, a date that some Western media have cited as a possible start of a Russian invasion.

Brent crude rose $2.04 or 2.2% to settle at $96.48 a barrel, after touching its highest since September 2014 at $96.78.

US West Texas Intermediate crude rose $2.36 or 2.5% to settle at $95.46 a barrel, after hitting $95.82, the loftiest since September 2014.

Away from geopolitics, Fed officials continuing to spar over how aggressively to begin upcoming interest rate increases at their March meeting.

Hawkish Fed official James Bullard, who last week broke ranks to call for a large 50-basis-point increase, reiterated calls for a faster pace of interest rate hikes on Monday, though other officials were more cautious in their public remarks.

First Metro Investment Corp. Head of Research Cristina S. Ulang said the market dropped amid increasingly risk-off sentiment.

Most sectoral indices ended in the red except for mining and oil, which jumped 251.74 points or 2.31% to 11,176.38, and holding firms, which climbed 52.71 points or 0.75% to 7,026.69.

Meanwhile, property fell 75.75 points or 2.21% to 3,351.30; industrials tumbled 139.29 points or 1.32% to 10,411.25; financials dropped 15.91 points or 0.91% to 1,725.92; and services went down 16.53 points or 0.86% to 1,904.72.

Value turnover dropped to P8.03 billion with 1.21 billion issues traded on Tuesday from the P14.19 billion with 1.19 billion shares that switched hands on Monday.

Decliners beat advancers, 106 versus 75, while 56 names closed unchanged.

Net foreign selling dropped to P263.59 million from the P2.42 billion recorded on Monday. — M.C. Lucenio with Reuters

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