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Monday, March 4, 2024

Stocks, peso fall on profit-taking, buck other Asian markets’ uptrend

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Philippine stocks fell for a second day, bucking the uptrend in other Asian markets.

The 30-company Philippine Stock Exchange index lost 40.26 points, or 0.64 percent, to close at 6,224.88, while the broader all-shares index dipped 15.24 points, or 0.46 percent, to settle at 3,324.44 Thursday.

Philstocks Financial Inc. research analyst Mikhail Plopenio said that aside from continued profit-taking, investor sentiments were dampened on concerns over China’s economy after its November manufacturing data registered a contraction.

“Market participation continued to show improvement with a net value turnover of P7.8 billion,” Plopenio said.

The peso also closed lower at 55.485 against the US dollar Thursday, compared to 55.39 Wednesday as global crude prices picked up.

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Meanwhile, other Asian markets ticked higher Thursday, with focus on the release of key US inflation data that comes as traders ramp up bets the Federal Reserve will cut interest rates next year.

Observers say signs the world’s top economy is feeling the effect of long-running monetary tightening has given the bank room to take a more dovish approach to fighting inflation, which is sharply down from the four-decade highs seen in 2022.

That, combined with several Fed decision-makers indicating they are in favor of holding rates where they are, has given a much-needed shot of confidence to traders at the end of a tough year.

And the latest reports provided further optimism.

The Fed’s Beige Book summary of the economy showed activity had slowed in recent weeks and the labor market continued to cool — policymakers have said some softening in jobs would be required in order to get inflation back to their two percent target.

Gross domestic product expanded quicker than expected in the third quarter and consumer spending growth slowed slightly.

The readings suggest the Fed is managing to control prices while not causing too much pain for the economy.

Eyes are now on the release of the personal consumption expenditures (PCE) index—the bank’s preferred gauge of inflation—with forecasts pointing to a further retreat. The core reading came in slightly lower than expected, data showed Tuesday.

“The Fed could find themselves in a ‘sweet spot’,” Jeffrey Roach at LPL Financial said.

“Inflation is trending lower, the consumer is still spending—but at a slower pace—and the Fed could end its rate hiking campaign without much pain inflicted on the economy.”

Traders are now predicting a cut in the first half of next year.

Cleveland Fed boss Loretta Mester indicated she would be in favor of a third straight pause at the December meeting, while her Atlanta colleague Raphael Bostic said he was confident inflation was coming down.

The comments followed similar utterances from other policymakers earlier in the week, though Richmond Fed chief Thomas Barkin warned of the need to keep the option of another hike open if inflation flares again.

Bank of Singapore’s Mansoor Mohi-uddin warned that the economy would likely face headwinds in 2024 but remained upbeat on the outlook for equities.

“Less fiscal stimulus, rising unemployment and falling savings are all set to hurt economic activity in 2024,” he wrote.

“We forecast the US will likely suffer a mild recession next year. But with core inflation also set to fall below three percent towards its two percent target, we think the Fed will start lowering its Fed funds rate each quarter, with 25-basis-point cuts in June, September and… December.

“The Fed’s easing will be measured but will benefit risk assets.”

Markets were subdued in early Asian trade on Thursday after a largely flat day in New York but they mostly recovered some of their mojo in the afternoon.

Tokyo, Hong Kong, Shanghai, Sydney, Seoul, Wellington, Jakarta and Taipei all rallied, though Singapore, Manila, Mumbai and Bangkok were in the red.

London, Paris and Frankfurt rose at the open.

Oil extended a two-day rally on a report that OPEC and its allies were mulling additional cuts of as much as a million barrels per day.

Saudi Arabia and Russia have already imposed massive reductions this year in a bid to support prices but the latest decision has proved tough as African producers push back against the move.

The grouping will hold an online meeting later Thursday to make an announcement. With AFP

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