Stocks closed virtually flat Monday on thin trading and ahead of the Federal Reserve’s expected interest rate hike this week.
The Philippine Stock Exchange Index slipped 10.17 points, or 0.2 percent, to 6,721.08 on a value turnover of P3.6 billion. Losers beat gainers, 99 to 60, with 67 issues unchanged.
Fiber broadband provider Converge ICT Solutions Inc. fell 5.2 percent to P27.30, while Metropolitan Bank & Trust Co., the second-biggest lender in terms of assets, declined 2 percent to P50.05.
AC Energy Corp. of the Ayala Group, however, climbed 2.5 percent to P7.40, while Jollibee Foods Corp., the largest fast-food chain, rose 2.3 percent to P220.
The rest of Asian markets fell in holiday-thinned trade Monday following another tech-led rout on Wall Street.
Adding to the dour mood was data showing Chinese manufacturing activity shrank last month at its fastest pace since the start of the pandemic owing to COVID-19 lockdowns in the country’s biggest cities.
The government’s refusal to shift from its zero-COVID policy and strict containment measures is fanning fears about the world’s number two economy and key driver of global growth.
Tokyo, Seoul, Mumbai and Wellington all fell.
Sydney also retreated, though Qantas rose more than two percent after saying it would launch the world’s longest non-stop commercial flight between Sydney and London by the end of 2025.
Trading floors around the world have been buffeted for months by a perfect storm of crises including China’s lockdowns, surging inflation, Fed plans to hike rates, elevated oil prices and the war in Ukraine.
All eyes are on the US central bank’s policy meeting this week, which is expected to see it hike borrowing costs by half a point—the most since 2000—and follow it with several more increases before the end of the year.
And now some analysts are predicting it could even announce a three-quarter-point increase at some point as it battles more than 40-year-high inflation.
However, with some commentators warning rates could go as high as three percent, there are also worries the Fed could be too heavy-handed and tip the US economy into recession.
Fed boss Jerome Powell “could cement the view that 50 (basis points) is the new 25, but more worrying for stock pickers, there are lots of QE to unwind,” said SPI Asset Management’s Stephen Innes, referring to the quantitative easing bond-buying programme used by the Fed to keep rates low. “So, the question is, how much of the impact of the balance sheet runoff” has been priced in.
The prospect of higher borrowing costs has been compounded by a sharp slowdown in China, with lockdowns in the biggest cities including Shanghai slamming output and snarling supply chains.
Data at the weekend showed the country’s manufacturing activity shrank the most it has since February 2020, and the near future does not look promising as officials shut down cinemas and gyms over the May Day holiday. With AFP