Philippine stocks posted slim gains Friday as the US September inflation report boosted expectations of possible US Federal Reserve rate hikes.
The 30-company Philippine Stock Exchange index inched up by 3.28 points, or 0.05 percent, to close at 6,266.34, while the broader all-shares index picked up 1.16 points, or 0.03 percent, to finish at 3,384.57.
Regina Capital and Development Corp. head of sales Luis Limlingan said investors digested the possible implications of the higher-than expected US consumer price index print of the global economy.
US inflation rate came in at 3.7 percent in September 2023, defying market expectations of a slight decrease.
Value turnover reached P5.23 billion, while foreign investors were in a net buying position amounting to around P81.53 million for the day.
Meanwhile, Asian equities went into reverse Friday, snapping a week-long rally, as a forecast-topping US inflation report revived fears the Federal Reserve will hike interest rates again before the end of the year.
Markets have enjoyed a fruitful few days since last week’s jobs report suggested the world’s top economy remained resilient but was not too strong to warrant more central bank tightening to tame prices.
The positivity pushed stocks higher as Treasury yields have come down after a succession of Fed officials lined up to suggest there was little need to lift borrowing costs from their two-decade highs.
However, the mood was darkened Thursday by data showing the consumer prices index rose slightly more than expected in September, highlighting the tough work still to do in the battle against inflation.
Still, the reading caused a spike in Treasury yields—exacerbated by a weak bond auction—and sent stocks tumbling in New York, though they pared some of those losses by the end of the day.
“Much of the ‘good’ work done in the past week in the form of bull flattening of the US yield curve has been undone by the latest US CPI report, which shows in particular still uncomfortably high core service sector inflation,” said National Australia Bank’s Ray Attrill.
While observers said the reading was unlikely to sway the Fed in its decision-making ahead of its next policy meeting in November, it shook traders out of their comfort zone.
Officials are expected to hold on rates next month, though there is much debate on their plans for December.
Hong Kong tumbled more than two percent, dragged by hefty selling in the tech sector, having enjoyed a strong run this week on hopes for more government support for the economy and struggling mainland markets.
There was little reaction to data showing a slight improvement in Chinese exports and imports, while inflation came in flat for September.
Tokyo, Shanghai, Singapore, Mumbai, Seoul, Sydney, Jakarta, Taipei and Wellington were also in the red.
London edged up in the morning but Paris and Frankfurt were both down.
“At the moment we appear to be in no-man’s land when it comes to the prospect of further rate hikes with a still resilient US economy, and rate policy that is struggling to return inflation to target,” said CMC Markets analyst Michael Hewson.
“The reality is that the path to 2 percent may take much longer to achieve than originally thought and markets are slowly starting to realize the direction of travel may well not be in a straight line.”
Currency traders were keeping a close eye on the yen as the dollar pushed towards 150 after the CPI reading, with Japanese officials warning they were watching for any extreme moves and primed for intervention.
Analysts said traders were worried about selling the yen too far in case Tokyo did step in to support the unit.
“Close attention is being paid to the 150 level,” Yuta Suzuki, of MUFG Bank, said. “Investors probably don’t want to buy dollar-yen above 150 primarily because of concerns about intervention.”
Oil prices jumped more than two percent as worries grow over Israel’s strikes on Gaza after Hamas launched a deadly attack on its neighbor last weekend.
Traders were spooked after the foreign minister of Iran, which supports Hamas and other Middle East militant groups, said on Thursday opening a “new front” against Israel would depend on Israel’s actions in Gaza.
Tehran has repeatedly denied claims it was involved in the militants’ attack Saturday.
Hamas on Friday rejected an Israeli order for 1.1 million residents to evacuate northern Gaza ahead of an expected ground incursion into the overcrowded Palestinian territory. With AFP