PH stocks drop as US jobs data fuel rate bets

Stocks dropped further on Monday following strong US jobs data, which could support expectations that interest rates will remain steady in the world’s largest economy, a stance that could be mirrored by the Philippine central bank.

The benchmark Philippine Stock Exchange index (PSEi) dropped by 6.48 points or 0.1% to end at 6,228.29 on Monday, while the broader all shares index declined by 1.93 points or 0.05% to finish at 3,327.65. 

“The market is down on strong US employment numbers, pointing to an extended Fed hawkish pause, reinforcing the Bangko Sentral ng Pilipinas’ (BSP) steady hold on the key rate and vigilant stance on the local currency,” First Metro Investment Corp. Head of Research Cristina S. Ulang said in a Viber message.

A US Labor department report showed nonfarm payrolls increased by 199,000 jobs in November, compared with an estimated increase of 180,000, Reuters reported.

The unemployment rate slipped to 3.7%, while average earnings edged up to 0.4% on a monthly basis, compared with forecasts of 0.3% growth.

Interest rate futures show traders widely expect the Federal Reserve to hold interest rates steady at its meeting on Dec. 12-13, according to the CME FedWatch tool.

“The local bourse dropped… as investors digested the statement of the BSP Governor Eli M. Remolona, Jr. that it is premature to discuss policy easing in 2024, prompting negative sentiment due to potential adverse impacts on the economy with prolonged elevated interest rates,” Philstocks Financial, Inc. Research Analyst Claire T. Alviar said in a Viber message.

Mr. Remolona last week said it is premature to discuss policy easing in 2024, with the Monetary Board still prepared to hike borrowing costs if needed to make sure inflation returns to the 2-4% target range.

The Monetary Board will hold its last policy meeting for this year on Thursday, a day after the Fed’s review.

A BusinessWorld poll last week showed 15 out of 17 analysts expect the Monetary Board to keep its target reverse repurchase rate steady this week, with the central bank remaining vigilant amid lingering upside risks to prices despite easing inflation recently.

Most sectoral indices declined on Monday. Financials went down by 33.26 points or 1.95% to 1,672.47; mining and oil dropped by 96.56 points or 1% to 9,543.94; industrials retreated by 24.21 points or 0.27% to 8,738.49; and services decreased by 3.66 points or 0.23% to 1,537.70. 

Meanwhile, holding firms rose by 44.57 points or 0.75% to 5,956.61 and property climbed by 18.06 points or 0.65% to 2,762.44.

Value turnover went up to PHP 4.06 billion on Monday with 392.39 million issues changing hands from the PHP 3.67 billion with 270.24 million issues traded on Thursday.

Decliners outnumbered advancers, 118 to 64, while 48 names ended unchanged. 

Net foreign selling dropped to PHP 32.81 million on Monday from PHP 410.52 million on Thursday.

The market was closed on Friday for a non-working holiday. — RMDO with Reuters