Analysts see volatile stock trading

Trading in the Philippine Stock Exchange is expected to remain volatile during this shortened trading week as investors weigh mixed economic data that came out last week.

The stock market will be closed on Friday as the country celebrates Independence Day.

“Volatility will continue in the equities market since we still have the turbid air of uncertainty lingering. This will last until the complete lifting of Luzon-wide ECQ takes place and the process of normalization begins. COVID-19 will alter consumer behavior and take a bite on corporate profits, down 15.8 percent in Q1 (for 23 reports out of 30 constituent stocks), until the virus subsides.” First Metro Investments Corp. said.

First Metro, however, expects the index to continue to increase to the 6,500-point level on hopes the overall economic conditions will improve in the second half of the year.

Meanwhile, the House of Representatives last week approved on third and final reading the P1.3-billion economic stimulus program aimed at boosting the domestic economy. But the National Economic and Development Authority conceded that the stimulus program was not fundable.

The 30-company Philippine Stock Exchange Index rallied 10.7 percent week-on-week for the second straight week to 6,465.13 on positive sentiments arising from the gradual reopening of the economy and improving investor sentiment.

Investors also welcomed the deceleration in the country’s inflation rate, which stood at 2.1 percent in May from 2.2 percent recorded in April.

The record high unemployment rate of 17.70 percent in April, however, may cause investors to capitalize on their recent gains.

Meanwhile, bourses in Europe and the United States surged Friday following a surprisingly strong US jobs report, which markets viewed as validating recent equity gains and proving the economy is recovering.

The Labor Department reported the US economy regained 2.5 million jobs in May and the unemployment rate dropped as coronavirus pandemic shutdowns began to ease.

The report defied even the most optimistic expectations among economists, who had been expecting a payroll decline of more than eight million and a jobless rate of 20 percent or higher.

“This a mind-blowing number and shows that the economy is improving,” said Naeem Aslam, chief market analyst at AvaTrade.

“Things are not as bad as many thought. This data, if it is a true reflection of the economy, is likely to speed up the recovery for the US economy,” he said.

The jobs figures sparked major gains in Paris, London and Frankfurt, as well as in New York, where the Dow piled on around 830 points, or 3.2 percent, to finish at 27,110.98, while the Nasdaq finished within a few points of a record.

The gains capped a banner week for Wall Street, which has risen steadily from March when stocks plunged after a series of shocking moves to shutter much of the US economy.

Since then, investors have looked past huge increases in unemployment, weakening consumer confidence and other grim indicators in anticipation of better times against a backdrop of massive stimulus from Washington. With AFP