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Stocks to move sideways ahead of US CPI report

PHILIPPINE STOCKS may move sideways this week as investors await the release of latest US inflation data, which may provide hints on the Federal Reserve’s next move, as well as local economic reports.

The benchmark Philippine Stock Exchange index (PSEi) went up by 9.50 points or 0.15% to close at 6,361.82 on Friday, while the broader all shares index rose by 5.37 points or 0.15% to 3,410.76.

Week on week, the PSEi jumped by 196.47 points or 3.19% from its close of 6,165.35 on July 1.

Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said the market sustained its positive momentum last week.

“The sustainability of this rally is questionable, however, amid the lingering economic headwinds that may dampen sentiment. This includes the peso’s further weakening, and the supply problems of certain agricultural goods, both of which pose upside risks to inflation,” Mr. Tantiangco said in a Viber message.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the PSEi rose as part of a “relief rally” following hawkish signals from the Bangko Sentral ng Pilipinas (BSP) chief.

BSP Governor Felipe M. Medalla last week said the central bank is prepared to raise its policy rate by 50 basis points in their Aug. 18 meeting to keep inflation in check after the peso on Thursday breached the P56 level against the dollar to move closer to its record low.

Headline inflation reached 6.1% in June, the fastest in nearly four years. This brought inflation in the first half to an average of 4.4%, above the central bank’s 2–4% target but still lower than its 5% forecast for this year.

“The PSE also gained recently as US stock markets similarly gained to a near one-month high, as global market sentiment supported by China’s planned $220-billion economic stimulus mostly through infrastructure spending, as well as recent signals from Fed officials about a possible soft landing or preventing an economic contraction,” Mr. Ricafort added.

For this week, he said the market will monitor the release of US consumer price index (CPI) data and the Fed’s Beige Book on July 13, as this could give some hints on the US central bank’s future policy path.

“The situation in the financial markets would remain similar for as long as the Russia-Ukraine conflict drags on, in terms of relatively elevated global commodity prices and inflation,” Mr. Ricafort said.

He put the PSEi’s support for the week at the 6,000-6,100 range and resistance between 6,500 and 6,600.

Meanwhile, Philstocks Financial’s Mr. Tantiangco said aside from US inflation data, investors will also take cues from upcoming reports on Philippine foreign trade, foreign direct investments, and overseas Filipino remittances.

He placed the PSEi’s immediate support from 6,100 to 6,150 and resistance at 6,350 to 6,400. — J.I.DP. Tabile

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