Stocks fell Monday after the US Federal Reserve raised interest rates and Chairman Jerome Powell suggested they would go higher than expected, blowing a hole in hopes for a more dovish pivot in its fight against inflation.
The PSE index, the 30-company benchmark of the Philippine Stock Exchange, lost 50 points, or 0.8 percent, to close at 6,156.11 as four of the six subsectors declined.
The broader all-share index also gave back 19 points, or 0.6 percent, to settle at 3,257.83, on a value turnover of P4.5 billion. Losers outnumbered gainers, 114 to 61, while 37 issues were unchanged.
Four of the 10 most active stocks ended in the green, led by International Container Terminal Services Inc. which climbed 5.8 percent to P172.00 and Semirara Mining and Power Corp. which rose 4.3 percent to P35.35.
The peso also depreciated to 58.80 against the US dollar Thursday, from Wednesday’s 58.47 following the Fed’s announcement. The Bangko Sentral ng Pilipinas said it would match the Fed’s 75-basis-point adjustment in its own overnight borrowing rate.
Asian and European markets also sank Thursday. Equities have rallied for more than a week on speculation the US central bank would join others in tamping down its monetary-tightening campaign as the economy showed signs of slowing.
The Fed bank unveiled a fourth straight 75 basis-point increase—the sixth hike this year—and opened the door to a smaller increase at future meetings, giving a boost to Wall Street.
But Powell soon after sent traders scattering when he told a news conference that while it would be appropriate to lessen the size of the hikes, “incoming data since our last meeting suggests that ultimate level of interest rates will be higher than previously expected”.
He added that “we still have some ways” until borrowing costs were at the necessary level and that it “is very premature to be thinking about pausing”.
And while there is a building fear that the increasingly tight monetary conditions will send the world’s top economy into a recession, the Fed boss said it would take time for the effects of the measures to kick in.
“The historical record cautions strongly against prematurely loosening policy,” he warned. “We will stay the course, until the job is done.”
Investors now expect rates to top out at more than five percent, compared with four percent currently.
The comments hammered the narrative that had supported stocks, sending Wall Street’s three main indexes tanking – led by rate-sensitive tech giants—and pushing the dollar up against its peers.
“Every time the market gets a little bit of dovish hope, it gets smacked on the nose with a rolled-up newspaper,” Scott Rundell of Mutual Ltd said. “There’s a lot of volatility still ahead.”
Hong Kong led the losses as the city’s central bank hiked rates in line with the Fed, owing to their policy link via the dollar peg.
Traders gave back a chunk of the previous two days’ gains, which came on the back of speculation China was planning to roll back some of its painful zero-Covid policies. Adding to the selling was confirmation from Beijing’s health authority that it intended to stick to the strategy.