Local shares edged lower Thursday as investors focused on the minutes of the US Federal Reserve’s latest monetary policy meeting.
The 30-company Philippine Stock Exchange index lost 38.13 points, or 0.58 percent, to close at 6,474.26.
China Bank Capital managing director Juan Paolo Colet said investors turned negative after a review of the Fed’s meeting reaffirmed its hawkish stance on US monetary policy.
“Sentiment was also weighed by China’s export curbs on certain metal used in electronics and semiconductors in what is seen as an escalation of its technology trade war with the US and Europe,” Colet said.
Colet said investors were looking for new catalysts to drive stock prices, as the deceleration of domestic inflation rate was already priced in by traders.
RCBC chief economist Michael Ricafort said the local equities declined after US stock markets mostly corrected slightly lower overnight.
Ricafort said while the market was down in the past two trading days, the decline was considered a healthy downward correction from two-week highs recently.
Markets fell again in Asia on Thursday as traders resigned themselves to more US interest rate hikes after minutes from the Federal Reserve’s June meeting showed officials felt more needed to be done to rein in inflation.
The notes added to worries about the global economic outlook after another round of depressed data out of China highlighted the tough work facing authorities as they try to kick start growth after years of zero-Covid-induced sluggishness.
Traders are also awaiting the release of key US jobs data over the next two days as well as watching Treasury Secretary Janet Yellen’s four-day visit to Beijing that aims to stabilize tense relations between the world’s two largest economies.
The Fed minutes showed policymakers were split on the decision to stand pat last month after 10 straight rate increases, surprising some commentators and dealing a blow to hopes the bank was nearing the end of its tightening cycle.
“Some participants indicated that they favored raising the target range for the federal funds rate 25 basis points at this meeting or that they could have supported such a proposal,” they read.
Those backing an increase cited a tight jobs market, stronger-than-expected economic activity and few signs that inflation was on the path to their two percent target.
In the end, however, all 11 voting members on the policy committee supported the pause, though the minutes said “almost all” agreed more tightening will likely be needed this year.
“It was a little surprising given that the decision (to hold rates steady) was sold as unanimous from Fed officials,” said Lindsey Piegza of Stifel Nicolaus & Co.”It’s pretty clear that there was a divergence of opinions, with some officials pretty clearly giving some reluctance for a one-month pause.”
And National Australia Bank’s Rodrigo Catril added: “It seems that the hawks were persuaded to toe the line in exchange for the prospects of further tightening later in the year.
“The minutes also show that this bias for further hikes is fueled by an overriding concern over elevated price pressures and a tight labor market.”
Others warned that a cut in borrowing costs, which had been keeping investor sentiment buoyed earlier in the year, was a long way of and officials would likely keep rates elevated for some time.
While growth remains healthy for now, the prospect of even more rate hikes has stoked worries that the Fed could tip the economy into recession, weighing on risk sentiment.
All three main indexes on Wall Street ended in the red as investors returned from the Independence Day holiday.
And Asia followed suit, extending losses from the previous day.
Hong Kong led losses, plunging three percent at one point as tech firms were hit by rate worries and China’s economic woes as well as ongoing concerns over the property sector battered banks and developers.
Tokyo suffered hefty selling pressure, while Sydney, Seoul, Singapore, Taipei,
Bangkok and Wellington were also down.
Traders are now keen to see figures on US jobs vacancies, jobless claims and jobs creation, which are due on Thursday and Friday. With AFP