Stocks fell for a second day on the prospect of continued monetary tightening after the Bangko Sentral ng Pilipinas raised its key interest rate by 50 basis points on Thursday.
The PSE index, the 30-company benchmark of the Philippine Stock Exchange, shed 36 points, or 0.54 percent, to close at 6,779.02 Friday, as four of the six subsectors declined.
It was still up 3.24 percent since the start of this year’s trading despite the losses this week.
The broader all-share index also lost 17 points, or 0.48 percent, to settle at 3,621.69, on a value turnover of P5.68 billion. Losers overwhelmed gainers, 123 to 56, while 39 issues were unchanged.
Five of the 10 most active stocks ended in the green, led by DITO CME Holdings Corp. which climbed 4.21 percent to P3.22 and Globe Telecom Inc. which rose 3.55 percent to P2,040.00.
The peso also traded lower at 55.24 against the US dollar Friday, following Thursday’s close of 55.12.
Meanwhile, most Asian markets also registered losses Friday as two Federal Reserve officials hinted at ramping up their institution’s monetary tightening campaign in the face of stubbornly high US inflation.
Data showing the US wholesale price index eased slightly last month but rose more than forecast, reinforced the view that the central bank still has much more work to do to defeat inflation—even after almost a year of lifting borrowing costs.
The reading came as other figures from the United States showed consumer prices came down slower than expected and retail sales surged, while job creation smashed estimates and unemployment claims came in on the soft side.
Markets last month rallied on hopes the Fed would be able to pause its hiking cycle soon—or even cut rates by the end of the year—but now there is a realization that more increases are needed to get inflation back to the bank’s two percent target.
“You will not sustainably get to two percent inflation when you have a labor market that is this tight,” Steve Chiavarone, of Federated Hermes, told Bloomberg News. “It is so completely out of whack.”
The tighter policy environment has renewed fears on trading floors that the US economy will tip into recession.
St. Louis Fed boss James Bullard and his Cleveland counterpart Loretta Mester on Thursday became the latest monetary policymakers to warn further hikes were in the pipeline. With AFP
“My overall judgement is it will be a long battle against inflation, and we’ll probably have to continue to show inflation-fighting resolve as we go through 2023,” warned Bullard.
He also said he would not rule out doubling the next rate increase to 50 basis points next month, a view shared by Mester.
“As we showed, when the economy calls for it, we can move faster, and we can do bigger at any particular meeting. And it’s going to be driven by how the economy is evolving,” she said, adding that she saw a compelling case for a 50 basis-point move at the bank’s last meeting.
She also noted that nothing indicated a pause would be in order at the moment.
Michael Hewson at CMC Markets said her comments “raise the question that even if there wasn’t a compelling case for a 50-basis-point move back then amongst other members, surely the data since then suggests that there might be a stronger case for a 50bps move in March”.
All three main indexes on Wall Street closed more than one percent lower Thursday, and Asia followed suit.
Hong Kong, Tokyo, Sydney, Shanghai, Seoul, Mumbai, Bangkok, Jakarta, Wellington and Taipei Manila were all in the red. With AFP