Fed decision, US data to affect Philippine shares

THE OUTCOME of the US Federal Reserve’s policy meeting and the release of US consumer inflation data overnight are expected to affect Philippine stocks for the remainder of the week, analysts said.

The benchmark Philippine Stock Exchange index (PSEi) fell by 0.75% or 48.57 points to end at 6,410.07 on Tuesday, while the broader all shares index retreated by 0.49% or 17.19 points to finish at 3,450.05.

All sectoral indices ended lower on Tuesday. Services dropped by 1.79% or 35.60 points to 1,953.25; mining and oil declined by 1.43% or 129.70 points to 8,880.71; property lost 1.01% or 24.94 points to end at 2,423.22; holding firms went down by 0.33% or 18.78 points to 5,636.48; financials dropped by 0.29% or 5.82 points to 1,968.19; and industrials gave up 0.28% or 26.14 points to close at 9,049.07.

Philippine financial markets were closed on Wednesday for the Independence Day holiday.

Local stocks may trade sideways with a downward bias once trading resumes on Thursday due to “jitters over the upcoming Fed policy messaging” and a lack of catalysts, First Metro Investment Corp. Head of Research Cristina S. Ulang said in a Viber message.

“We’ll be watching closely the US inflation report later tonight, which is expected to remain unchanged at 3.4%. If it’s higher than that, we might see an extension of the downtrend for the remainder of the week, but if it’s lower than expected, we might see a reprieve,” AP Securities, Inc. Research Head Alfred Benjamin R. Garcia added in a Viber message on Wednesday.

The Fed was set to end a two-day policy meeting overnight, where it was expected to keep its target rate at the 5.25%-5.5% range for a seventh straight meeting.

The US central bank was also set to release updated economic and interest rate projections at the review. Officials have turned more hawkish since the last such release in March, when the median projection was for a reduction of three quarter points this year, Reuters reported. Markets are currently pricing in only 37 basis points of cuts by December.

May US consumer price index (CPI) data were also set for release overnight.

In April, the US CPI rose 0.3% on a monthly basis after advancing 0.4% in March and February, the Labor department’s Bureau of Labor Statistics said.

In the 12 months through April, the CPI increased 3.4% after climbing 3.5% in March.

The release of the May US producer price index on Thursday could also affect Philippine shares for the rest of the shortened trading week, Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Mr. Ricafort put the bellwether PSEi’s next support at the 6,400 level and its major support at 6,360.

“The next minor resistance level over the past month is at the 6,510 level,” he added. — R.M.D. Ochave with Reuters