The stock market tumbled Friday to join a global sell-off after the European Central Bank laid the groundwork to join others in a program of interest rate hikes, while attention turns to the release of key US inflation data.
The Philippine Stock Exchange Index slumped 228.55 points, or 3.4 percent, to 6,530.04 on a value turnover of P6 billion. Losers overwhelmed gainers, 131 to 45, with 40 issues unchanged.
Major property developer Ayala Land Inc. of the Ayala Group sank 5.4 percent to 30, while SM Investments Corp. of the Sy Group fell 4.9 percent to P820.
PLDT Inc. of the Salim Group of Indonesia, the biggest telecommunications firm, dropped 4.4 percent to P1,836, while Semirara Mining and Power Corp. of the Consunji Group, the largest coal producer, declined 4.5 percent to P34.10.
The rest of Asian markets extended a global sell-off Friday. After a largely positive start to the week, Asian investors tracked their US and European colleagues in selling up as they contemplate higher borrowing costs and surging prices, which many fear could lead to a recession.
Adding to the unease was news that officials in China had once again locked down millions of people for COVID testing due to another flare-up in cases, dealing a blow to hopes for an economic reopening.
Still, the move helped push down oil prices—a key driver of global inflation—owing to concerns about the impact on demand.
Tokyo, Hong Kong, Sydney, Seoul, Singapore, Taipei, Mumbai, Bangkok, Wellington and Jakarta were all down.
With prices rising at a decades-high pace, central banks have been forced to withdraw the vast financial support measures put in place to combat the impact of the pandemic that helped fuel a rally across markets to record or multi-year highs.
The ECB became the latest to join the tightening campaign, announcing Thursday the end of its bond-buying program and signaling it will hike rates several times this year.
It also sharply upgraded its inflation forecasts for this year and next while lowering the economic growth outlook.
Focus now turns to the release of US consumer price figures later Friday, with a strong reading likely to give the Federal Reserve more room to be aggressive.
“A robust May… print will probably prompt (policymakers) to hint at a 50 basis point hike for the September meeting,” said SPI Asset Management’s Stephen Innes.
“The tone will remain hawkish and the tough talk on inflation will continue.”
However, he added that “the significant upward revisions to core inflation projections are close to ending. Risk markets could take solace if one or two participants shift to seeing the inflation outlook is more balanced.”
Expectations are that the Fed will hike by half a point for at least three more meetings before January.
Other commentators also suggested that traders were looking for signs inflation may be close to its highs.
“The big question is whether inflation has peaked or not,” said Matthew Simpson of StoneX Financial.
“Inflation may have softened to a degree in April, but traders really want to see further evidence that inflation is pointing lower to call ‘peak inflation’ with confidence.
“Besides, one single month of data doesn’t define a trend.” With AFP