The stock market edged slightly higher Tuesday tracking Wall Street’s late rally as investors gird themselves for another big Federal Reserve interest rate hike this week, though fears of a recession remain elevated.
The Philippine Stock Exchange Index added 11.04 points, or 0.2 percent, to 6,448.46 on a value turnover of P4.7 billion. Gainers beat losers, 94 to 82, with 55 issues unchanged.
BDO Unibank Inc. of the Sy Group, the biggest lender in terms of assets, rose 2.2 percent to P123.10, while sister firm SM Prime Holdings Inc. climbed 1.1 percent to P35.60.
Synergy Grid & Development Inc., operator of the country’s power grid, however, slumped 6.8 percent to P12.32, while Puregold Price Club Inc. of retail tycoon Lucio Co fell 3.7 percent to P30.20.
The rest of Asian markets also enjoyed a much-needed bounce Tuesday.
Global equities have taken a severe body blow in recent weeks as central banks struggle to rein in stubbornly high inflation, Russia continues its war in Ukraine and China’s economic woes darken the mood across trading floors.
Hong Kong rose more than one percent with tourism-linked firms boosted by news that the city’s government was considering bringing an end to the hotel quarantine rules that have helped hammer the local economy.
Sydney and Mumbai were also up more than one percent, while Tokyo returned from a long weekend to post healthy gains. Shanghai, Seoul, Singapore, Taipei, Wellington, Bangkok and Jakarta were also higher.
With the main concern being that sharp increases in borrowing costs will cause recessions in major economies, this week will be a minefield for traders with several countries, including Britain, tipped to announce more tightening.
The Fed’s decision, however, is the main focus after figures last week showed prices are still rising at rates not seen since the early 1980s.
Most observers expect the bank to announce a third successive 75-basis-point lift, though there are some who have flagged a possible one-percentage-point move.
And there is speculation that the rises will not stop until the rate is above four percent, still some way from the current 2.25-2.75 percent.
“We expect central bank tightening and a fading of supply chain pressures to moderate job growth and core inflation,” JPMorgan Chase & Co said, tipping it to end at 4.25 percent by early next year.
“In turn, we anticipate this will allow the Fed and other central banks to pause” in the first half of 2023, said strategists including Marko Kolanovic and Nikolaos Panigirtzoglou.
In a sign of expectations that rates will continue up for some time, the two-year Treasury yield is on course to break four percent for the first time since 2007.
It is also much higher than the 10-year yield, which is called an inversion and considered a key pointer to recession.
The outlook remains downbeat, with Edward Moya at OANDA warning the lows of June could be seen again.
“Pessimism for equities remains elevated as the US economy appears to have a one-way ticket towards a recession as the Fed is poised to remain aggressive,” he said in a note.
“The risks for a retest of the summer lows could easily happen if the Fed remains fully committed (to) their inflation fight.” With AFP