Market declines as investors await President’s new policies

By Jenniffer B. Austria

LOCAL stocks traded sideways

Monday ahead of President Ferdinand Marcos Jr.’s State of the Nation Address.

The 30-company Philippine Stock Exchange index slipped 16.31 points, or 0.25 percent, to close at 6,631.25, while the broader all-shares index went down 4.19 points to 3,526.71.

China Bank Corp. managing director Juan Paolo

Colet said trading started in the green but closed the day in the red as investor sentiments turned cautious ahead of SONA.

“Market value turnover was relatively thin with many traders on the sidelines as they await this week’s news flow,” Colet said.

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“Reaction to the SONA may drive market activity tomorrow, but investors are likely to hold off their major bets until the Federal Reserve’s policy meetings,” he said.

Meanwhile, Asian equities were mixed Monday, with investors gearing up for policy decisions at major central banks this week, while concern over the Chinese economy continued to dampen sentiment.

With recent data releases suggesting inflation is now coming down after more than a year of interest rate hikes, hope is building that officials are close to bringing an end to their tightening cycles.

The key focus will be on the Federal Reserve, which is widely expected to announce another increase in borrowing costs, while traders are looking for guidance on its plans after that.

Debate is swirling about whether or not it will call it a day or keep going in order to bring inflation down to its two percent target, from the current three percent.

A string of positive data in recent months has given the Fed some room to take its foot off the pedal and allow the economy to avert a feared recession.

“The Fed should not signal another skip in September, as doing so for the June meeting really handcuffed the Fed at a time when it needed maximum flexibility,” said Win Thin at Brown Brothers Harriman & Co. “Given how firm the labour market remains, we believe the right thing for the Fed to do is to emphasize a more data-dependent approach and stress that a skip in September should not be assumed.”

And Deutsche Bank economists wrote in a recent note to clients that they “see the line between mild recession and soft landing as increasingly fine and view the probabilities of the latter outcome undeniably on the rise”.

Goldman Sachs has cut its probability of recession in the next 12 months to 20 percent from 25 percent. With AFP