Stocks turn green on rate cut hopes

MANILA, Philippines — Local stocks halted a two-day downtrend yesterday to open December on a positive note, with the benchmark Philippine Stock Exchange index (PSEi) finishing at 6,245.18, up by 21.45 points or 0.34 percent.

Likewise, the broader All Shares index gained 4.39 points or 0.13 percent to close at 3,332.22.

Total value turnover reached P4.4 billion. Market breadth was positive, 92 to 79, while 41 issues were unchanged.

Luis Limlingan of Regina Capital said the local equities market started the last month of the year on an optimistic note along with regional markets, although other Asian bourses edged lower, despite expectations interest rate cuts in Europe and the US would help ease pressure on local currencies and central banks.

“Our sense is that quite a lot of the good news is already in the price. A little bit of profit-taking and rebalancing have probably played in the month-end, obscuring the messaging we typically get from the price action,” said Rodrigo Catril, a senior FX strategist at the National Australia Bank.

Oil prices, which slid more than two percent overnight as output cuts by OPEC+ producers underwhelmed, remained subdued even as Israel’s military said it has resumed combat against Hamas in the Gaza Strip, after a seven-day truce, raising the prospect of renewed violence in the Middle East.

Regional surveys of purchasing managers showed factory activity in Asia remained weak. Japan’s factory activity shrank at the fastest pace in nine months while South Korea’s factory activity were unchanged after 16 months of contraction. Mixed factory activity data for China pointed to still feeble economic recovery in November.

Overnight, data showed that both US and European inflation are cooling as desired. Benign data on US inflation reinforced market expectations for about 115 basis points in rate cuts from the Federal Reserve next year, with a first move fully priced in for May.

The major surprise was with euro zone inflation, which missed forecasts by a large margin, triggering a slide in the euro and prompting markets to price in rate cuts of about 110 basis points next year, commencing as early as April.

Traders are now waiting for Fed Chair Jerome Powell’s Q&A appearance on Friday, with bulls betting the central bank chief will accommodate market wishes.