PHL stocks stumble as Fed delivers hawkish cut

PHILIPPINE SHARES sank to the 6,300 level on Thursday to hit an over five-month low amid a global sell-off after the US Federal Reserve signaled fewer rate cuts ahead due to inflation concerns.

The Philippine Stock Exchange index (PSEi) dropped by 1.13% or 73.48 points to close at 6,395.60, while the broader all shares index fell by 0.76% or 28.25 points to 3,671.75.

Thursday’s finish was the PSEi’s worst close in more than five months or since it ended at 6,358.96 on July 2.

This was also lower than its end-2023 finish of 6,450.04.

“The local market took cues from Wall Street’s drop, driven by the Federal Reserve’s trimmed projections on its rate cuts next year,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

“Philippine shares continued to drop following the Federal Reserve’s rate cut decision… Meanwhile, US equities fell on Wednesday, recording lows as the Fed hinted on a slower pace of cuts by 2025, pushing Treasury yields higher while dragging stocks,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

The US central bank cut interest rates on Wednesday, as expected, but Federal Reserve Chair Jerome H. Powell said more reductions in borrowing costs now hinge on further progress in lowering stubbornly high inflation, remarks that showed policy makers are starting to reckon with the prospects for sweeping economic changes under a Trump administration.

Mr. Powell’s explicit — and repeated — references to the need for caution from here on jolted Wall Street, sending stocks sharply lower, bond yields higher and leading investors to dial back estimates of how far borrowing costs are likely to fall over the coming year.

Rates will fall again once inflation shows it is making more progress, “with the extent and timing of additional adjustments to the target range” depending on “incoming data, the evolving outlook, and the balance of risks,” the Fed said in new language that sets up a likely pause to the rate cuts beginning at the Jan. 28-29 meeting.

US central bankers now project they will make just two-quarter-percentage-point rate reductions by the end of 2025.

All sectoral indices closed lower on Thursday. Mining and oil retreated by 2.36% or 175.72 points to 7,248.76; property sank by 1.68% or 39.77 points to 2,323.83; industrials went down by 1.36% or 122.35 points to 8,838.82; holding firms declined by 1.35% or 75.20 points to 5,496.44; services slumped by 0.69% or 14.43 points to 2,052.48; and financials dropped by 0.32% or 7.01 points to 2,178.36.

Value turnover went up to P6.03 billion on Thursday with 595.34 million shares traded from  the P5.96 billion with 1.39 billion issues exchanged on Wednesday.

Decliners outnumbered advancers, 126 versus 72, while 41 names were unchanged.

Net foreign selling rose to P997.59 million on Thursday from P487.26 million on Wednesday. — R.M.D. Ochave with Reuters