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Local stocks bounce back, brush aside US ratings downgrade
By Jenniffer B. Austria
STOCKS bounced back Thursday after Wednesday’s sell-off as bargain hunters cautiously picked up shares with promising earnings.
The PSE index, the 30-company barometer of the Philippine Stock Exchange, climbed 93.48 points, or 1.44 percent, to close at 6,576.76, while the broader all-shares index advanced 35.63 points to 3,499.49.
“The market brushed aside worries about the US credit rating downgrade and rallied back on the back of corporate earnings from key names and expectations that Philippine July CIP print will show sustained inflation deceleration,” China Bank Capital managing director Juan Paolo Colet said.
Colet said investors also took advantage of the recent sell-off to buy shares that reported or were expected to report positive first-half results.
Meanwhile, Asian markets fluctuated Thursday following a plunge on Wall Street as a forecast-beating US jobs report revived worries about the Federal Reserve’s interest rate-hiking campaign.
While the fallout from Fitch’s US debt rating downgrade settled, profittaking and rising Treasury yields kept pressure on investors heading into what is considered a less appealing time of year for equities.
The ratings agency’s decision to lower Washington’s gold-plated AAA classification rattled markets, fueling a race out of riskier assets, though analysts said there was unlikely to be much long-term impact from the move.
Still, traders were struggling to get back in the saddle -- having enjoyed a strong run-up in recent weeks -- as they reassess what some consider to be toohigh valuations and the outlook for the US economy.
Data from private payrolls firm ADP
Turkey’s annual inflation jumped to 47.83% in July
showing companies created 324,000 new jobs last month -- smashing forecasts of 190,000 -- suggested the labor market remained tight.
That jolted optimism that the Fed might have announced its last rate hike in July, as a string of recent reports showed inflation continuing to fall and parts of the economy appearing to slow.
The news sent 10-year US Treasury yields to their highest point since November, which was also blamed on the Treasury selling more bonds than expected in an auction.
The so-called VIX “fear gauge” hit levels not seen since May.
Wall Street’s three main indexes all tanked, with the Nasdaq shedding more than two percent because tech firms are more susceptible to higher rates.
And the selling seeped into Asia, though some markets swung through the morning.
Tokyo gave up more than one percent, while Shanghai, Sydney, Singapore, Seoul, Mumbai, Bangkok and Wellington were also off. However, there were gains in Hong Kong, Shanghai, Manila and Jakarta.
London fell at the open, with Paris and Frankfurt also both down.
Stephen Innes of SPI Asset Management said the next few weeks would be uncertain on trading floors as investors weigh their options after the recent healthy gains.
“As we approach the typically calmer summer season for markets, investors are discussing whether it’s better to expect a renewed surge in risky investments in the next few weeks or to prepare for a potentially significant decline if the data disappoints,” he wrote. With AFP
ISTANBUL—Turkey’s annual inflation climbed in July to 47.83 percent, up sharply from 38.2 percent, official data showed on Thursday, a week after the central bank more than doubled its year-end forecast.
The new figure, in line with expectations, comes as Turkey radically shifts its policies since the May election that includes an end to more than a two-year era of ultra-low interest rates.
Last week, the central bank revised its year-end inflation forecast to 58 percent from 22.3 percent after years of doubts from independent economists about the official rate.
The official rate had been steadily dropping since reaching a more than two-decade high of 85 percent in October last year. The central bank and economists have forecast an upward trend from July.
The consumer prices skyrocketed by almost 9.5 percent on a month-on-month basis, according to the TUIK state statics agency. A separate study released by independent economists from the ENAG group who question the official data put the July figure at 122.88 percent.
At her debut press conference last week, new central bank governor Hafize Gaye Erkan said inflation would increase “temporarily” due to the rising exchange rate of the lira as well as fiscal measures.
Under the former Goldman Sachs and First Republic Bank executive, the central bank twice hiked its interest rates from 8.5 percent to 17.5 percent even though that was not found ambitious enough by markets.
‘New policy’
“It’s clear that interest rate hikes are just one part of the new policy shift under way in Turkey at the moment and that monetary tightening further ahead will be gradual,” Liam Peach, senior emerging markets economist at London-based Capital Economics, said in a policy note.
“We think a rise in the policy rate to 27.50 percent or so by year-end is needed to sustain investor confidence,” he suggested.
Economists welcomed President Recep Tayyip Erdogan’s turn to more traditional economics even though he still believes that high interests rates contribute to—rather than cure—growing consumer prices. AFP
