The Philippines stock market inched up Tuesday on muted trading as investors await thje US inflation report and the Morgan Stanley Capital International (MSCI) rebalancing.
The bellwether Philippine Stock Exchange index closed at 6,608.36, up 4.11 points, or 0.06 percent, while the broader all-shares index picked up 4.15 percent, or 0.12 percent, to finish at 3,511.91.
Philstocks Financial Inc. research analyst Mikhail Plopenio said the market struggled to find direction, and investors maintained their cautious stance ahead of the release of key macroeconomic data.
Plopenio said investors were also waiting for the Bangko Sentral ng Pilipinas’ (BSP) policy meeting scheduled later this week.
Analysts said, however, the BSP was expected to keep its interest rates steady due to upside risks to the inflation.
“The digestion of Q1 2024 corporate earnings helped in bringing the local market to positive close,” Plopenio said.
Meanwhile the MSCI, the global index provider, is set to announce additions to and deletions from the indexes later this week. All changes will be made at the close of May 31, 2024.
Sectoral indices ended mixed with property, mining and oil and holding firms closing in the green, while services, financials and industrials ended in the red.
Value turnover was thin at P4.74 billion, while foreign investors were net sellers for the day by P158.2 million.
Global investors shifted cautiously Tuesday ahead of the release of key US inflation data that could have a huge bearing on the fate of Federal Reserve interest rate cuts this year.
The tepid performance mirrored an uninspiring day on Wall Street, where the Dow fell after an eight-day winning streak, though a strong showing for Chinese tech firms helped Hong Kong extend a rally that has seen it power around 30 percent higher from its January low.
A recent run of soft US jobs data has lifted spirits on trading floors that the Fed will be able to reduce borrowing costs this year.
However, this week will provide a key test of that optimism with the release of April’s consumer price index (CPI) on Wednesday, which follows Tuesday’s release of producer prices.
The readings come after forecast-beating figures for the first three months of the year that have seen investors whittle down their expectations for the number of rate cuts — from six in January to at most two now.
Analysts said a miss in either direction on CPI could have a big impact on markets, with JPMorgan Chase & Co’s Andrew Tyler saying, “the key risk is a hotter CPI print”.
“But upcoming macro data creates a two-tailed risk — with one tied to stronger-than-expected growth fueling inflation concerns and the other being weaker growth fueling either recession or ‘stagflation’ concerns,” he said.
The reports come after a survey by the New York Fed showed inflation expectations among US consumers had climbed to their highest level since November.
Rodrigo Catril at National Australia Bank added: “The CPI is expected to show US inflation slowed slightly in April, and if so, it would add to further evidence that the jump in US inflation at the start of the year was a temporary blip.
“That said, any small deviation from the consensus could trigger a meaningful reaction in markets given the current heightened degree of (sensitivity) around inflation and the outlook for Fed policy.”
Asian markets were mixed in Tuesday business, with Hong Kong ending down even while tech titans including Tencent and Alibaba rallied as they prepared to announce their first-quarter earnings.
Chris Weston, at Pepperstone Group, warned that “both will need to deliver earnings above consensus results and inspiring guidance, as expectations are high”.
Shanghai, Sydney, Wellington, and Jakarta also slipped, though Tokyo, Singapore, Taipei, Seoul, Taipei, Manila, Mumbai and Bangkok rose.
London was flat, while Paris and Frankfurt edged down.
“This week’s reports are likely to depict a second-quarter economic environment where real GDP and consumer demand are slowing to a more sustainable pace, while inflation remains persistent,” said SPI Asset Management’s Stephen Innes.
“This scenario may allow for potential rate cuts from the Fed later in the year, possibly by September, despite the near-term inflation outlook remaining uncertain.” With AFP
