Stocks to move sideways before inflation report

Philippine stocks may move sideways this week ahead of the release of August inflation report and amid hopes that the US Federal Reserve is done hiking rates following soft US data that came out last week.

The Philippine Stock Exchange index (PSEi) inched up by 0.09 point or 5.81% to close at 6,181.06 on Friday, while the broader all shares index went up by 0.21 point or 7.19% to 3,341.97.

Week on week, the PSEi also gained 20.45 points or 0.33% from its close of 6,160.61 on Aug. 25.

For this week, trading will be driven by economic data, analysts said.

“This week’s market direction will be shaped by investors’ reaction to the latest US jobs report, China’s efforts to prop up its economy, and the Philippine August inflation print,” China Bank Securities Corp. Research Director Rastine Mackie D. Mercado said in an e-mail.

The market’s movement will be affected by US and local data releases, China Bank Capital Corp. Managing Director Juan Paolo E. Colet likewise said in a Viber message.

“Domestic inflation data for August will be top of mind for most investors. The expectation is that this will be higher than July’s 4.7%, but a steep jump could introduce fresh volatility to the market,” Mr. Colet said.

US job growth picked up in August, but the unemployment rate jumped to 3.8% and wage gains moderated, suggesting that labor market conditions were easing and cementing expectations that the Federal Reserve will not raise interest rates this month, Reuters reported.

The economy created 110,000 fewer jobs than previously reported in June and July, which some economists said suggested there had been business closures that were not previously captured.

The labor market is slowing in response to the US central bank’s hefty rate hikes to cool demand in the economy.

Meanwhile, a BusinessWorld poll of 18 analysts yielded a median estimate of 4.9% for August Philippine headline inflation, close to the lower end of the central bank’s 4.8% to 5.6% forecast for the month.

If realized, this would be faster than the 4.7% print in July, but lower than the 6.3% seen in August 2022.

It would mark the 17^th straight month of inflation exceeding the Bangko Sentral ng Pilipinas’ 2-4% target for the year.

August inflation data will be released on Sept. 5, Tuesday.

“We also see the index possibly retesting the 6,150 support level after last week’s oversold rally fizzled out. A successful retest of a support level is an important indicator that the recent downtrend could be reaching a trough,” Mr. Mercado said.

For this week, Mr. Mercado placed the PSEi’s support at 6,150 and resistance at 6,370-6,420, while Mr. Colet put support at 6,150 and resistance at 6,350. — S.J. Talavera with Reuters