Philippine stocks dropped below the 6,400 level Tuesday as investors await the release of May inflation data.
The bellwether Philippine Stock Exchange index lost 84.32 points, or 1.30 percent, to close at 6,386.42, while the wider all-shares index shed 32.01 points, or 0.92, to end at 3,439.04.
Meanwhile, the peso closed at 58.71 against the US dollar Tuesday, weaker than Monday’s 58.68.
The Philippine Statistics Authority is set to release the May inflation data Wednesday.
The Bangko Sentral ng Pilipinas (BSP) earlier said it expects the May 2024 inflation rate to settle between 3.7 percent and 4.5 percent on higher vegetable and electricity prices and weaker peso.
Regina Capital Development Corp. head of sales Luis Limlingan said market sentiments turned negative following BSP Governor Eli Remolona’s statements on interest rate cut. Remolona said in a forum the 150-basis-point rate reduction outlook earlier given by Department of Finance Secretary Ralph Rector is “too aggressive.”
Remolona also hinted possible 25 basis points rate cut in August and another 25-basis-point rate reduction late this year.
All sub-indices closed in the negative, with holding firms declining 2.5 percent followed by mining and oil which went down 1.29 percent and property which traded lower by 1.24 percent. Value turnover improved to P5.74 billion.
Meanwhile, most Asian markets mostly fell Tuesday on signs of weakness in the US economy, even as the data boosted hopes for an interest rate cut, while Mumbai tumbled as it appeared India’s Prime Minister Narendra Modi would not win as big an election victory as expected.
The losses came as energy firms were weighed by a further drop in oil that came after OPEC and other major producers said they would begin lifting output before the year’s end, calling time on a period of cuts that has kept crude elevated.
Investors have shifted nervously in recent weeks on concerns that the Federal Reserve will not cut rates until 2025 as inflation remains stubbornly above target and decision-makers warned against moving too early, insisting on seeing more evidence prices are under control.
The Institute for Supply Management (ISM) released its manufacturing index on Monday, showing US activity contracted for a second successive month in May.
The figures indicated that businesses were struggling with elevated interest rates and weak consumer spending, among other things.
“The manufacturing ISM data reaffirmed several prevailing economic trends: decelerating inflation, slowing growth, and a tight labor market,” said Gary Pzegeo of CIBC Private Wealth US.
“We should see higher odds of a rate cut later this year priced into interest rate futures,” he added.
While traders have of late taken soft economic data as a positive sign, owing to the fact it gives the Fed room to cut rates, the latest news stoked concerns about the outlook for the economy.
BMO Capital Markets’ Ian Lyngen and Vail Hartman added that “investors are on guard for indications that the downside trajectory is accelerating”.
Focus is now on the release of closely watched non-farm payroll figures that are due out on Friday and will provide a fresh snapshot of the labor market and economy.
Wall Street’s three main indexes diverged, with the Nasdaq and S&P 500 supported by Big Tech.
But Asia stumbled, with Tokyo, Shanghai, Sydney, Seoul, Singapore, Taipei, Bangkok and Wellington all in negative territory.
Hong Kong, however, reversed an early loss to edge up, while Shanghai, Wellington and Jakarta also advanced.
Mumbai tumbled more than seven percent at one point as Modi’s Bharatiya Janata Party looked set to win India’s national elections but not with the landslide initially expected.
The Sensex had jumped more than three percent Monday on hopes a big majority would help Modi push through economy-boosting measures.
London, Paris and Frankfurt were all in the red.
Oil prices extended the losses of more than three percent racked up Monday after OPEC said it would begin lifting output later in the year and through 2025, after an extended period of cuts.
The news came as investors were already fretting over China’s ongoing economic troubles and figures showing demand in the United States appeared to be thinning.
“OPEC+ has a history of surprising the market, and this time was no different as the group unveiled a roadmap to start raising output in 2025,” said HSBC strategists in a commentary.
“How OPEC+ unwinds its multiple, complex set of cuts… remains one of the biggest questions for the oil market.
“In our view, the agreement provides some clarity for the next 19 months, but questions remain including how remaining cuts will be unwound beyond end-2025.”
