Philippine stocks rebounded Thursday along with most Asian markets as US inflation rate eased in April, renewing hopes that US Federal Reserve will start cutting rates by the second half of the year.
The bellwether Philippine Stock Exchange index jumped 69.57 points, or 1.06 percent, to close at 6,628.20, while the broader all-shares index added 25.10 points, or 0.72 percent, to 3,524.52.
China Bank Capital managing director Juan Paolo Colet said market participants also priced in expectations that the Bangko Sentral ng Pilipinas (BSP) would keep its policy rates unchanged.
The BSP in its Monetary Board meeting on Thursday decided to keep interest rates on the overnight deposit and lending facilities at 6 percent and 7 percent, respectively.
It also maintained its target reverse repurchase rate at 6.5 percent.
Except for financials, which declined 0.33 percent, all sectors ended in the green led by property (+3.72 percent), holding firms (+1.63 percent), and mining and oil (+0.20 percent).
Value turnover improved to P6.67 billion. Foreign investors were net sellers, with net outflows reaching P196.75 million.
Meanwhile, Asian equities rallied Thursday after US data showed inflation cooled last month, fueling speculation that the Federal Reserve would cut interest rates twice this year.
The news sent all three main indexes on Wall Street to record highs, with confidence given an extra boost by figures showing retail sales well below expectations, suggesting consumers were taking a step back.
The 3.4-percent clip in April consumer prices was in line with forecasts but down from March and capped a run of three straight months above estimates that forced investors to reel in their rate cut hopes.
The Fed is now tipped to reduce borrowing costs twice before the end of the year, an increase on the one previously predicted — though a lot fewer than the six estimated in January.
“We see the April print as consistent with a direction of travel for inflation dynamics that — in the context of moderation in the real economy—can yield a September cut followed by a second in December,” Evercore’s Krishna Guha said.
Adding to the upbeat mood was a report showing retail sales were flat in April.
“The market likes it,” said Gary Pzegeo of CIBC Private Wealth US.
“The news on core inflation was better than expected. Retail sales also showed some deceleration from the previously hot consumer sector. Taken together, this supports a Fed rate cut in the fall.”
Taylor Nugent at National Australia Bank added: “It’s a world more aligned with the Fed’s characterization that disinflation remains in train even if it is taking a bit longer than earlier hoped.
“It should help quieten, at least for now, any concern the Fed’s confidence rates will prove sufficiently restrictive.”
He said the next move “is likely to be down”.
Still, Minneapolis Fed boss Neel Kashkari was keen to move cautiously as he questioned how much of an impact monetary policy was having on inflation.
“That’s an unknown—we don’t know for sure,” he said.
“And that tells me we probably need to sit here for a while longer until we figure out where underlying inflation is headed before we jump to any conclusions.”
His remarks came a day after Fed chief Jerome Powell said the battle against prices was proving tougher than expected and indicated rates could remain elevated for some time.
Investors, however, took the latest data as a reason to press on with a market rally, which on Wednesday saw the Dow, S&P 500 and Nasdaq end at all-time highs in New York.
And Asia extended the advances, with Hong Kong returning from a midweek break on a strong note, while Shanghai, Sydney, Singapore, Seoul, Wellington, Taipei, Manila, Mumbai, Bangkok, and Jakarta were also well in the green.
Tokyo advanced even after data showed Japan’s economy shrank more than expected in the first three months of the year.
London, Paris and Frankfurt all fell a day after expectations for cuts by the Bank of England and European Central Bank helped all three to their own records.
The dollar held losses against its main peers as the prospect of lower rates made the greenback less attractive to foreign investors, while the cheaper greenback also pushed gold back towards $2,400 for the first time since last month. With AFP
