Stocks rise on expected strong GDP growth

STOCKS rose Wednesday on expected strong firstquarter gross domestic product growth, with the agriculture sector posting a recovery from last year’s slump.

The PSE index, the 30-company benchmark of the Philippine Stock Exchange, rose 35 points, or 0.54 percent, to close at 6,658.59 as five of the six subsectors advanced, led by holding firms.

The broader all-shares index went up 13 points, or 0.39 percent, to settle at 3,546.10

US Fed official leaves door open on new rate hike

WASHINGTON, USA—A top Federal Reserve official left the door open Tuesday on a further interest rate hike to combat inflation, although stressing that the US central bank’s future decisions must be data dependent.

The comments by New York Fed President John Williams came a week after policymakers unveiled a tenth and possibly final rate increase in the current cycle, adding that they would consider the impact of existing hikes before determining further moves.

But on Tuesday, Williams told the Economic Club of New York: “We haven’t said we’re done raising rates.”

He acknowledged “incredible progress over the past year or so” in lifting rates to bring inflation down, but added: “I think what we’re going to need to do as we always do is be data dependent.”

Williams also said he does not see “any reason to cut interest rates this year” in his baseline forecast, citing a need to lower stubborn inflation.

“In my forecast, we need to keep a restrictive stance of policy in place for quite some time to make sure we really bring inflation down,” he added.

The Fed has embarked on a forceful campaign of rate hikes since March last year to rein in inflation. Its quarter-point increase last week lifted the target lending range to between 5.0 percent and 5.25 percent, marking the highest level in around 16 years.

While US economic growth has since lost steam, with some analysts warning of a possible downturn, Williams said Tuesday that he does not expect to see a recession.

But he added that he expects the unemployment rate to gradually inch up over the next year as the labor market cools. AFP on a value turnover of P4.64 billion. Losers outnumbered gainers, 105 to 73, while 57 issues were unchanged. Seven of the 10 most active stocks ended in the green, led by Bloomberry Resorts Corp. which climbed 6.38 percent to P11.00 and JG Summit Holdings Inc. which rose 3.01 percent to P51.40.

Meanwhile, the peso recovered Wednesday to close at 55.67 against the US dollar ahead of the release of firstquarter GDP growth. The local currency tumbled 0.92 percent to 55.76 Tuesday.

In other Asian markets, stocks extended losses as traders awaited the release of US inflation data, with sentiment clouded by a range of issues including the debt ceiling standoff in Washington and banking sector uncertainty.

After last week’s Federal Reserve interest rate hike and a forecast-beating jobs report, focus is lasered on the consumer price index reading later in the day, which will play a key decisionmaking role in the US central bank’s June policy meeting.

The Fed hinted at a possible pause in its long-running tightening cycle but observers warned that any sign inflation is creeping up would put pressure on officials to turn the screws further.

And while the world’s top economy continues to show resilience, several indicators suggest it is easing, feeding concerns that it could be heading for a recession.

“Even though investors continue to anticipate the best of both worlds with the medium-term trends around inflation and interest rates falling together, growth is also slowing,” said SPI Asset management’s Stephen Innes.

“Central banks are still tightening policy, which limits the upside to risky assets.”

Adding to the headache for the Fed is the need to avoid causing more ructions in the finance sector after the recent upheaval that has seen three US regional lenders go under, one taken over by JPMorgan, and UBS buying Credit Suisse in the space of two months.

The lenders’ troubles have been partly blamed on the rapid rate hikes since last year, meaning monetary policymakers have been forced to rethink their approach to bringing down inflation. With AFP

G7 MEETING. Workers install a welcome signboard near the hosting venue of the upcoming G7 Finance Ministers and Central Bank Governors’ Meeting in Niigata on May 10, 2023. AFP