The Philippine stock market continued its rally Friday even as Wall Street ended mixed on higher-than-expected US inflation rate.
The Philippine Stock Exchange index rose 29.45 points, or 0.44 percent, to close at 6,643.18, while the broader all-shares index went up by 10.85 points, or 0.31 percent, to finish at 3,506.61.
Regina Capital Development Corp of head of sales Luis Limlingan said the market still managed to close higher even as US December inflation rate came in “hotter-than-expected”.
“Higher rents and food boosted the cost of goods to 3.4 percent, prompting investors to think that the Federal Reserve’s drive to slow inflation rate to 2 percent target may take longer than what was initially projected,” Limlingan said.
Foreign investors were net buyers by P360 million
Meanwhile, oil prices surged Friday after US and UK forces launched strikes against Iran-backed Huthi rebels in Yemen following attacks on ships in the Red Sea, fueling worries about a wider conflict in the crude-rich region.
The move weighed on sentiment among investors, though stocks were mixed after data showing US inflation rose more than expected last month further dented hopes for an early interest rate cut by the Federal Reserve.
The offensive against rebel positions in Yemen — which included fighter jets and Tomahawk missiles — fanned already high tensions in the Middle East as Israel presses on with a war in Gaza in response to a Hamas attack on the country in October.
The Huthis have carried out a growing number of strikes on vessels in the Red Sea, a key international shipping route, since the Gaza war erupted, hitting trade flows at a time when supply strains are putting upward pressure on inflation globally.
Washington and London’s decision followed a Huthi bombardment this week that was said to be their heaviest to date, having carried out missions on an almost daily basis since the start of the Israel-Hamas war.
SPI Asset Management’s Stephen Innes warned of the threat of an escalation owing to the Huthis’ links to Tehran.
“While this event may not constitute the ‘big one’ — a direct threat to Iranian leaders or assets — circumstances could evolve if the current escalation jeopardizes Iran’s credibility or an increasingly confident Israel expands its targets,” he said in a commentary.
“Concerns about the risk of miscalculation are growing, as rational actors may unintentionally become entangled in an escalatory spiral.”
News of the US-UK strikes, which President Joe Biden said also had support from Australia, Bahrain, Canada and the Netherlands, sent oil prices up more than two percent Friday, with analysts saying WTI could pass $75 and Brent could top $80.
The jump in prices sparked concerns about a fresh spike in inflation that could complicate central bank pivots to a more dovish monetary policy this year, reviving worries about the economy.
“If oil were to substantially increase… that would jeopardize… this soft landing scenario that is quite likely for the year,” Andrew Slimmon, of Morgan Stanley Investment Management, told Bloomberg Television.
Investor sentiment was further dampened by data showing the US consumer price index rose more than forecast in December, dealing another blow to the prospects of the Fed starting its rate cut cycle as soon as March.
Equities had finished 2023 with a strong rally on expectations the central bank would hit the ground running on cutting rates owing to falling inflation and an indication from decision-makers that they would do so this year.
But minutes from the Fed’s December meeting showed officials were keen to keep borrowing costs elevated for an extended period to make sure they had a handle on prices. That was followed by forecast-busting jobs data that showed the labor market remained resilient.
While Thursday’s closely watched CPI reading was not the nail in the coffin for a March reduction, observers said it made that argument harder to make.
Still, Chris Zaccarelli of the Independent Advisor Alliance said: “What should be most important for investors is that the Fed is done raising rates.
“Whether they cut in March or cut in June and whether they cut four times, three times, or only two times, shouldn’t matter too much.”
Wall Street’s three main indexes ended flat, though Asia struggled and Europe began on a positive note.
Hong Kong and Shanghai fell as data showed Chinese exports fell for the first time in seven years, while inflation fell for the third straight month — its worst run since 2009. The figures further highlighted the dour state of the world’s number two economy as leaders struggle to come up with a solution to kickstart growth.
However, the readings also fanned speculation the government will unveil fresh stimulus measures.
Sydney, Seoul, Singapore, Jakarta and Taipei also fell, though Wellington, Manila, Mumbai and Bangkok rose.
And Tokyo piled on more than one percent to extend a rally that on Thursday propelled it past 35,000 for the first time since 1990.
The Nikkei surge has been fueled by a weaker yen, which boosts exporters, and optimism about the outlook for the Japanese economy.
London, Paris and Frankfurt opened on a positive note. With AFP