A LIKELY Federal Reserve (Fed) rate cut in September helped lift the peso higher on Friday but fears of a US recession weighed on the stock market, which closed out the week on a down note.

The currency strengthened by 25 centavos to close at the day's low of P58.08 against the dollar while the benchmark Philippine Stock Exchange index (PSEi) shed 88.53 points, or 1.32 percent, to 6,605.30.

The broader All Shares index also fell by 32.28 points, or 0.89 percent, to 3,596.90.

The peso opened at P58.3:$1 and traded as high as P58.34. Volume reached P1.356 billion, up from the P1.170 billion recorded on Thursday.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the peso appreciated after dovish signals from Fed Chairman Jerome Powell that the US central bank could finally start cutting interest rates in September.

News that the US factory sector had shrunk faster than forecast and that the private sector created far fewer jobs than expected in July, however, sparked fears of a US recession and led to a plunge on Wall Street.

"Given some dismal economic data in the US, investors were worried that the Federal Reserve might now be late in easing monetary policy, potentially leading to recession," Philstocks Financials Inc. research associate Claire Alviar said.

Regina Capital Development Corp. Managing Director Luis Limlingan echoed this, saying that "Philippines shares tumbled to 6,605.30 along with the rest of the region on growing fears of a potential recession [in the US]."

"The spotlight now shifts later on the release of July's nonfarm payrolls, a key catalyst for stocks," he added.

All sector indices closed in the red with services down the most by 1.98 percent.

Decliners outnumbered gainers, 112 to 59, while 53 were unchanged.