The Philippine stock market posted its seventh straight day of decline, after the US Federal Reserve delivered a hawkish rate cut and signaled fewer-than-expected adjustments for 2025.
The bellwether Philippine Stock Exchange index closed at 6,395.60, down by 73.48 points, or 1.14 percent, from previous trading, while the broader all-shares index lost 28.25 points, or 0.76 percent, to settle at 3,671.75.
US and Asian stocks also retreated amid the grim outlook from the Fed.
While US Fed reduced rates by 25 basis points on Wednesday to between 4.25 percent and 4.5 percent as expected, Fed chair Jerome Powell hinted fewer cuts next year due to stubborn inflation despite easing price pressures. The market was earlier expecting four rate cuts in 2025.
All indices ended in the negative territory, led by mining and oil, which dropped 2.37 percent as gold prices declined, property by 1.68 percent and industrial by 1.37 percent.
Value turnover reached P5.86 billion, with 72 advancers against 126 decliners.
Ayala Land Inc. declined by 4.05 percent to P24.90, while BDO Unibank Inc. rose 3.5 percent to P148.
The peso again hit the bottom of 59 against the US dollar Thursday.
Meanwhile, Asian equity markets sank Thursday following a severe sell-off on Wall Street that came after the Federal Reserve halved its rates outlook, while the yen weakened as the Bank of Japan decided against a hike.
All three main indexes in New York were sent spinning Wednesday — led by a rout in high-flying tech titans — after the Fed delivered what was described as a “hawkish cut” in rates.
Some suggested the retreat may have also been fueled by president-elect Donald Trump’s opposition to a spending package aimed at averting a fast-approaching US government shutdown.
While the reduction had been widely expected, its closely watched “dot plot” of projections for further moves suggested the bank will cut rates just twice next year, as opposed to the four previously forecast.
Investors had already been speculating about how the Fed would position itself as Trump prepares to take office amid warnings that his plans to cut taxes, slash regulations and impose tariffs on China could reignite inflation.
That was followed by Powell’s comments in which he indicated that the battle against inflation was key because it has remained stubbornly above the bank’s two percent target.
“We need to see progress on inflation,” he said in a news conference. “We moved quickly to get to here, but moving forward we are moving slower.”
While the Fed lifted its economic growth outlook, the prospect of rates staying higher than anticipated for longer dealt a hefty blow to markets, with the S&P 500 losing three percent and the tech-heavy Nasdaq more still.
The dollar also cruised higher against its peers and was sitting around a two-year high against the euro.
Asian markets all fell, with Tokyo, Hong Kong, Shanghai, Sydney, Seoul, Mumbai, Taipei, Bangkok, Singapore, Wellington, Manila and Jakarta all well down.
London was down at the start of trading Thursday, as were Paris and Frankfurt.
Jack McIntyre, a portfolio manager at Brandywine Global, said the rate cut had already been priced in by markets but “when you include the forward guidance components, it was a hawkish cut”.
“Stronger expected growth married with higher anticipated inflation — it’s no wonder the Fed reduced the number of expected rate cuts in 2025.
“The results of this meeting raise the question: if the market wasn’t expecting a rate cut today, would the Fed actually have delivered one? I suspect not.
“The Fed has entered a new phase of monetary policy, the pause phase. The longer it persists, the more likely the markets will have to equally price a rate hike versus a rate cut. Policy uncertainty will make for more volatile financial markets in 2025.”
The yen weakened to as much as 156.77 per dollar — from around 153.57 earlier in the day — after the Bank of Japan’s decision not to hike rates for a third time this year. The announcement did help the Nikkei 225 stock index pare earlier losses, though.
While officials said in policy statement that “Japan’s economy has recovered moderately” and “is likely to keep growing”, they also pointed to risks ahead.
These include “developments in overseas economic activity and prices, developments in commodity prices, and domestic firms’ wage- and price-setting behavior”.
Observers said there would be a renewed focus on the yen as it weakens, with the possibility that Japanese authorities could step in to support the currency if it weakens too far too quickly.
SPI Asset Management’s Stephen Innes said “There’s an elevated risk that USDJPY could trend higher soon but could be met with a barrage of verbal intervention on quick moves or even increased odds of a more substantial rate hike from the Bank of Japan early in the New Year.” With AFP
