Fed meeting, inflation outlook to drive trading

SHARES may continue to move sideways this week as investors await the US Federal Reserve’s policy meeting and the release of Philippine April inflation data, which could both affect the direction of local benchmark interest rates.

On Friday, the Philippine Stock Exchange index (PSEi) rose by 0.81% or 53.87 points to 6,628.75, while the broader all shares index climbed by 0.71% or 24.78 points to 3,492.75.

Week on week, the PSEi also climbed by 2.88% or 185.75 points from its 6,443 close on April 19.

The Philippine stock market saw “calmer” sessions last week following the recent rout as investors look ahead to the Fed’s April 30-May 1 policy meeting, online brokerage 2TradeAsia.com said in a note.

For this week, the US central bank’s meeting will be in the spotlight as investors await hints on their next move, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

“Investors are… expected to watch out for policy outlook clues from the Fed’s meeting [this] week following the latest macroeconomic data from the United States wherein first-quarter gross domestic product grew below expectations, but first quarter personal consumption expenditures inflation accelerated compared to the preceding quarter,” Mr. Tantiangco said.

The US central bank last month kept its target rate at the 5.25%-5.5% range for a fifth straight meeting after raising interest rates by a cumulative 525 basis points from March 2022 to July 2023.

The Fed is widely expected to keep the policy rate steady and to continue to signal no urgency on cuts, Reuters reported. Fed Chair Jerome H. Powell has said the central bank needs more confidence that inflation is heading towards their 2% goal before cutting rates.

The Fed’s policy hints and the release of Philippine inflation data for April, scheduled on May 7, could affect the local interest rate outlook, Mr. Tantiangco added.

Headline inflation rose for a second straight month to 3.7% in March, bringing the first quarter average to 3.3%, within the Bangko Sentral ng Pilipinas’ 2-4% annual target.

2TradeAsia.com placed the PSEi’s immediate support at 6,300 and resistance at 6,550-6,600.

“The PSEi’s solid bounce at the 6,400 zone is a relief signal in an otherwise lackluster week… The split week ahead may further dilute volumes but earnings results and annual stockholders’ meetings should help inject excitement throughout early May,” it added.

Philippine financial markets will be closed on May 1, Wednesday, for Labor Day.

Mr. Tantiangco put support at 6,400 and resistance at 6,700.

“Chart-wise, last week, the market was able to close above its 200-day exponential moving average (EMA). This week, the market may test the validity of its breach of the said line. If it is able to hold its position above its 200-day EMA, we may see more upward momentum moving forward,” he added. — RMDO with Reuters