Share prices are expected to consolidate within a narrow range this week as worries about global economic slowdown will likely temper any market gains, analysts said over the weekend.
Online brokerage firm UTrade Inc. said the slowdown in global economy remained a major concern among investors as interest rates would likely be raised again over soaring inflation.
The Philippine Statistics Authority said Thursday inflation climbed to a 14-year high of 8.1 percent in December from 8 percent in November on faster increases in the prices of food and non-alcoholic beverages.
Analysts said that as global central banks would likely raise interest rates over the short term, the further tightening could affect the growth of the global economy.
“Investors are confronted with the fact that while macro inflation drivers may have peaked in December due to pill forces related to seasonally higher demand, supply drivers remain pressured and ultimately still supportive of more hawkish action from central banks,” online brokerage firm 2TradeAsia.com said.
“Pending unique disruptions to supply chains, the next few quarters should be characterized by moderate inflation and increasing consumer confidence as spending behavior readjusts to new suggested retail prices,” it said.
The bellwether Philippine Stock Exchange index rose 1.55 percent last week to close at 6,667.00 on Friday, as investors returned to the market after the holiday season.
European and US stocks also advanced Friday and the dollar fell as investors digested key American jobs data that dampened expectations of more aggressive Federal Reserve interest rate hikes.
After firm gains in Europe, major indices in New York shook off early weakness and finished firmly higher, with the Dow piling on more than two percent.
The much-anticipated monthly government jobs report was solid, with the United States economy adding a better-than-expected 223,000 jobs in December as unemployment dipped to 3.5 percent.
But analysts pointed to a tempering of wage growth, which was up 4.6 percent on a 12-month basis through December, compared with a 4.8 percent reading for the prior month.
That was followed by a surprisingly poor services sector report from the Institute for Supply Management.
The report showed the first contraction since spring of 2020, with the business activity index and new orders index both plunging.
“We’re still in a ‘bad news is good news’ type of market reaction,” said Nick Reece, a vice president at Merk Investments. “I’m not sure if that dynamic is going to last forever.”
“I feel like at some point, we’re going to get into ‘a bad news is bad news’ dynamic with respect to a potential recession being bad for the stock market,” he said.
Global equities have enjoyed a largely upbeat start to the new year after a dismal 2022 marked by concerns over the war in Ukraine and central bank rate hikes aimed at taming soaring prices.
The dollar fell Friday versus the euro and other currencies over what dealers said were dimming expectations of more aggressive rate hikes from the Fed.
“A combination of slightly slower US wages growth, and a disappointing ISM services report for December has seen the US dollar slide back sharply, pulling the pound off its lowest levels since November… as traders pare back bets that the Fed might hike by [50 basis points] in February,” CMC Markets analyst Michael Hewson told AFP. With AFP