Stocks fall again as traders eye more rate hikes

MANILA, Philippines — Share prices further spiraled downward yesterday after a string of interest rate hikes by central banks revived worries about the global economy.

The benchmark Philippine Stock Exchange index (PSEi) broke the 6,400 support as it lost 11.36 points or 0.18 percent to close at 6,393.55, while the broader All Shares index tumbled to 3,414.75, down by 2.94 points or 0.09 percent.

Total value turnover was lean at P3.3 billion. However, market breadth was positive, 103 to 89, while 41 issues were unchanged.

Unicapital Securities said the market continued  to decline following the US Federal Reserve’s hawkish signals.

Eyes are also on Tokyo after forecast-beating inflation figures fuelled speculation on whether the Bank of Japan (BoJ) will shift away from its ultra-loose monetary policy that has dragged on the yen.

The optimism that characterized the first half of June – fuelled by hopes the Fed was close to the end of its hiking cycle – has given way to concern that officials still had several more in them as they battle stubborn price rises.

Last week’s decision to stand pat after 10 straight increases added to the sense of hope, but warnings Wednesday from Fed Chair Jerome Powell that more work was needed took the wind out of traders’ sails.

He told US lawmakers that two more this year was “a pretty good guess.”

His comments came as the Bank of England (BoE) lifted rates more than expected, while officials in Switzerland and Norway also tightened. That followed hikes last week in the euro zone, Australia and Canada.

However, some observers are sceptical the Fed will follow through with its warnings as US inflation continues to subside, falling to 4.0 percent in May from 4.9 percent in April. The Fed’s target is 2.0 percent.

Kristina Hooper, at Invesco, said two hikes this year risked causing a “significant recession.”

“There is a lengthy lag between when monetary policy is implemented and when it actually shows up in the real economy data,” she said. “We haven’t seen much of an impact yet because of that lag.