Downtrend seen as Fed remains hawkish

PHILIPPINES stocks are likely to be in the loss column this week as the latest revelations from the Chairman of the US Federal Reserve (Fed) will negatively affect market sentiment globally.

This, while the local stock market closed Friday in the green at 6,752.50, up 46.07 points.

“Federal President[man] Jerome Powell’s speech hinted that US monetary policy will continue to aggressively hike interest rates which, in turn, is seen to have a negative effect on foreign capital flows and the local currency of the Philippines. said Japhet Tantiangco, senior research analyst. at Philstocks Financial Inc.

“Investors should also watch upcoming data on bank lending and the Standard and Poor’s Global Philippines Manufacturing Price Index for clues about the state of our local economy,” he added.

Powell delivered a direct message in his Jackson Hole speech. Very simply, he said that rates have yet to rise, and once there, they will be there for a long time.

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He also noted that the Federal Open Market Committee’s June projections suggested rates would rise to just below 4% through the end of 2023 and that historical accounts cautioned against easing policy too quickly.

Graphically, Tantiangco sees local market support at 6,600 while its immediate resistance is seen at its 200-day exponential moving average at 6,800. With the expected bearish bias, the local market could test its support at 6,600 next week. .

Michael Ricafort, Chief Economist at Rizal Commercial Banking Corp., also shared the same sentiment and it could really influence how local markets develop through the end of 2022.

The Philippines Stock Exchange Composite Index gained for the third straight day on Friday, in line with US stock markets still hovering between 2.5-month highs recently despite the latest declines of at least 3% on the 26th. August 2022 to nearly a month low after Fed Chairman Powell signaled at the Fed’s annual symposium in Jackson Hole that tight U.S. monetary policy would likely be needed for some time and that the History warns against premature easing of monetary policy,” Ricafort explained.

He sees the next resistance levels at 6,770 levels, with the next important objective at the 6,980-7,000 level, while immediate support should settle at the 6,500-6,600 level.

For its part, 2TradeAsia noted in its report that all investors are eyeing the local index’s tracking momentum in the second half of the year and wondering if the economy is really strong enough.

“Right now this is reflected in Bangko Sentral ng Pilipinas’ outlook for the third quarter, where it expects the economy to slow down a bit more on the numbers between 6.5 and 7.5%, below the 7.5% gross domestic product recorded in the second quarter,” the report explains.

2TradeAsia also suggested bracing for selling pressure from investors looking to quickly profit from market moves. He sees immediate support at 6,600 and resistance levels between 6,850 and 6,900.

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