NextGen Day

MANILA, Philippines — The main stock index rose at the start of the week on expectations that the Federal Reserve will raise interest rates again in May, but the peso fell versus the US dollar.

The Philippine Stock Exchange index (PSEi) recovered from a drop at the close of last week’s trade, rising 0.32 percent, or 22.24 points, to 7,020.83 points.

After rising 0.03 percent, or 1.20 points, to 3,722.80 points, the S&P 500 finished flat.

The majority of sectoral gauges, however, decreased during the day, including Mining and Oil, which lost 5.14 percent; Financials, which fell 0.89 percent; Industrial, which fell 0.65 percent; Services, which fell 0.11 percent; and Property, which fell 0.02 percent.

Only the Holding Firms index gained during the day, with a 1.34 percent increase.

With 650.1 million shares trading for PHP4.52 billion, the volume was light.

At 127 to 54, decliners outnumbered advancers, while 47 shares remained unchanged.

“Investors continued to weigh the likelihood of a 50 basis point rate hike in May as they braced for a slew of corporate earnings this week, including Amazon, Apple, Google-parent Alphabet, Meta Platforms, and Microsoft,” said Luis Limlingan, head of sales at Regina Capital Development Corporation (RCDC).

Apart from earnings reports from the United States and abroad, Limlingan said investors will be watching for the release of the personal consumption expenditures index in the United States on Friday, as well as domestic bank lending and March 2022 fiscal performance reports.

Meanwhile, the local currency concluded the day at 52.41, down from 52.315 the previous week.

It started the day at 52.38 and fluctuated between 52.48 and 52.38 during the day.

For the day, the average level was 52.428.

Volume was USD726 million, down from USD1.28 billion in the previous session.

Rizal Commercial Banking Corporation (RCBC) senior economist Michael Ricafort said the peso closed at its lowest level in a month “following more aggressive Fed rate hike signals from Fed officials and priced in the markets recently.”

Markets expect the Fed to implement a 0.50-percent hike in May, a 2-percent hike in September, and a 2.50-percent hike by the end-2022, according to Ricafort, following a 0.25-percent hike in the Fed’s key rates last March. “This will lead to new two-year highs for the US dollar vs. major global currencies,” he said.

The Fed’s key rate has been fluctuating between 0.25 and 0.50 percent since December 2018, with the most recent boost in March being the first since December 2018.

“Peso (is) also weaker when US stock markets hit fresh one-month highs,” Ricafort wrote, “since higher US/global interest rates could deliberately slow down the economic recovery to better rein in/control excessive inflation.”

On Tuesday, he expects the peso to trade between 52.30 and 52.45 to the US dollar.

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