Markets rise as traders look past rate hikes

MANILA, Philippines — Most Asian stock markets rose yesterday, reversing early losses and a selloff on Wall Street, as traders contemplate further interest rate hikes by central banks to tame inflation.

In the Philippines, the benchmark index closed higher at 6,142.79, up by 48.08 points or 0.79 percent, while the broader All Shares index gained 22.88 points or 0.69 percent to end at 3,316.95.

Total value turnover reached P4.36 billion. Market breadth was positive, 94 to 74, while 52 issues were unchanged.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the main index corrected higher for the second straight day, after declining for four straight days, as the market defied the latest declines in the US stock markets and ignored higher US Treasury yields  with 10-year tenors at new highs in nearly 16 years.

Equities have had a rough ride this week, with the US Federal Reserve’s closely watched “dot plot” guide on rates indicating it could announce another increase before the end of the year, while cutting less than initially hoped next year.

Those expectations were solidified Thursday with data showing applications for US unemployment benefits fell to the lowest level since January last week, pointing to a still strong labor market.

Ian Lyngen at BMO Capital Markets said the reading “marginally increases the chances the Fed hikes in November and certainly reinforces the Fed’s messaging regarding avoiding cuts as long as possible in 2024.”

Bets on further tightening also pushed 10-year Treasury yields to a 16-year high.

In a sign that the specter of inflation will linger for some time, central banks in Sweden, Norway and Switzerland all warned they would likely have to hike again at some point owing to sticky inflation.

While Fed decision-makers contemplate their next move, former St Louis Fed boss James Bullard said they might have to keep raising to avoid a re-acceleration of inflation, which is still well above the bank’s two percent target.

And former Treasury Secretary Lawrence Summers suggested officials were being overly optimistic in their economic outlook, adding they could be surprised by the pace of inflation while growth could slow more than expected.

A number of policymakers have said they were confident the United States can avoid a recession even as they push rates to two-decade highs.