Local stocks are expected to continue moving sideways this week as investors contemplate the central bank’s next policy decision to fight the stubborn inflation.
Analysts said the looming rate hikes by the Bangko Sentral ng Pilipinas continue to weigh on market sentiment as the US Federal Reserve is also expected to keep raising interest rates to bring down inflation rate in the world’s largest economy.
BSP Governor Felipe Medalla earlier said the government would monitor inflation on a month-on-month basis to determine its next policy movement.
“A rate cut is almost certainly out of the picture given leading indicators, and the BSP in particular may contend with not only demand-pull inflation but also cost-push inflation,” online brokerage firm 2TradeAsia.com said.
Analysts said while food supply was expected to improve in the coming months, consumers would still contend with unsteady agricultural prices, higher fuel costs and rising electricity rates with the onset of the dry season.
Meanwhile, the influx of earnings results of listed firms could provide the investors some optimism on the market.
“Earnings calls should remind markets that while external factors partly shape fundamentals, ultimately, corporate leadership strategy and product/service quality relative to competition is what drives value,” 2TradeAsia said.
The market’s sideways movement with a downward bias could provide opportunities for investors to accumulate stocks that are expected to quickly recover from the macroeconomic environment.
The bellwether Philippine Stock Exchange index fell 93 points last week to close at 6,685 on Friday amid the anemic trading because of lack of positive leads.
Trading was shortened last week after President Ferdinand Marcos Jr. declared Feb. 24 as a special non-working holiday to commemorate the EDSA Revolution.
Meanwhile, US stocks finished an ugly session decisively lower Friday after another round of hot inflation data exacerbated worries over monetary policy.
The Fed’s preferred gauge of inflation, the personal consumption expenditures price index, rose 5.4 percent last month from January 2022.
The report is the latest indicator to suggest the central bank still faces significant challenges in addressing sticky pricing pressure.
The yield of the 10-year US Treasury note climbed closer to four percent in a sign of rising expectations for more Fed interest rate hikes.
“It’s hard to suggest that this data is not concerning,” said Tom Cahill of Ventura Wealth Management, who questioned whether the Fed’s actions will “drive the economy into recession.”
The broad-based S&P 500 finished at 3,970.04, down 1.1 percent for the day and 2.7 percent for the week.
The Dow Jones Industrial Average dropped 1.0 percent to 32,816.92, while the tech-rich Nasdaq Composite Index slumped 1.7 percent to 11,394.94.
Among individual companies, Boeing slumped nearly five percent after it suspended deliveries of the 787 Dreamliner again.
The latest pause is a disappointment for the aerospace giant after it resumed deliveries of the jet in August, following a halt of more than a year. With AFP