Stocks fell Thursday to end a six-day advance ahead of key US jobs data at the end of the week, after Federal Reserve boss Jerome Powell warned it could ramp up its pace of interest rate hikes if the economy shows no sign of slowing.
The PSE index, the 30-company benchmark, lost 102 points, or 1.52 percent, to close at 6,609.27 Thursday as all six subsectors retreated.
The index encompassing all shares also tumbled 36 points, or 1.02 percent, to settle at 3,549.19, on a value turnover of P4.99 billion. Losers outnumbered gainers, 105 to 72, while 52 issues were unchanged.
Data showed that two of the 10 most active stocks ended in the green, led by International Container Terminal Services Inc. which went up 0.66 percent to P212.40 and BDO Unibank Inc. which rose 0.23 percent.
Most Asian stocks also traded lower. Markets have been falling since the start of February as a string of forecast-beating indicators have shattered hopes the US central bank could pause its tightening campaign soon, and even cut borrowing costs by the year’s end.
And on Tuesday, Powell delivered another blow by telling lawmakers that with inflation still stubbornly high and the jobs market tight, officials were prepared to hike by half a percentage point at their next meeting as they struggle to control prices.
That would be twice the last increase, which followed a period of bumper increases last year.
The prospect of rates going ever higher—with some predicting six percent from the current 4.5 to 4.75 percent—has ramped up fears the world’s top economy could tip into recession. Analysts pointed out that bond markets suggest a contraction is on the cards.
He reiterated monetary policymakers’ determination to quell inflation on Wednesday in a second day of testimony to US lawmakers, though he did say the decision would be driven by data, with a close eye on the labor market.
“If—and I stress that no decision has been made on this—but if the totality of the data were to indicate that faster tightening is warranted, we’d be prepared to increase the pace of rate hikes,” he said.
“Inflation is coming down but it’s very high,” he added. “Some part of the high inflation that we are experiencing is very likely related to a very tight labor market.”
Meanwhile, the Fed’s “beige book” survey of economic conditions said “inflationary pressures remained widespread” and that “labor market conditions remained solid”.
Powell’s comments “helped briefly pull yields lower and pull the US dollar off its highs for the day, but the reality remains that markets are slowly starting to come to the realization that rates are likely to remain higher for longer and that the terminal rate is also likely to settle at a much higher level”, said CMC Markets’ Michael Hewson.
Traders are now awaiting Friday’s non-farm payrolls figures for February, with a strong reading likely to put pressure on the Fed to hike by 50 basis points.
In a worrying sign for risk appetite, a report on the private sector showed a bigger-than-expected jump in jobs last month—double January’s number—while wage growth remained solid.
After a tepid day on Wall Street, Asian markets mostly edged down.
Hong Kong was flat while Shanghai fell with Singapore, Seoul, Wellington, Taipei, Mumbai, London, Paris and Frankfurt followed suit at the open. With AFP