STOCKS are seen to move sideways this week as the latest inflation data of the Philippines and the US may continue to dampen investor sentiment, fueling worries of harsher tightening by their central banks.

The benchmark Philippine Stock Exchange index (PSEi) shed 228.55 points or 3.38% to close at 6,530.04 on Friday, while the broader all shares index dropped by 88.73 points or 2.46% to close at 3,511.93.

Week on week, the PSEi declined by 211.36 from its close of 6,741.40 on June 3.

Analysts said that local shares ended lower last week with the release of inflation data of both the Philippines and the US for May.

“Investors are waiting to see if inflation has peaked or if the Fed will become even more aggressive in combating rising prices,” said Marc Kebinson L. Lood, head of online trading Timson Securities, Inc., in a Viber message.

“The coming week is likely to be choppy, with the majority of the public taking a wait-and-see attitude because there is no market catalyst to fuel index momentum upwards, but bargain-hunting activities with an upside bias should continue as the index approaches oversold levels this week,” he added.

RCBC Securities, Inc. Head of Research Erwin Rommel C. Fuentes said in an e-mail that he expects market sentiment to remain bearish after US inflation accelerated in May.

“In addition to lingering concerns of tighter monetary policy both here and abroad, investors are also weighing the second-round effects from the recent wage and fare hikes,” he added.

US consumer prices accelerated in May as gasoline prices hit a record high and the cost of food soared, leading to the largest annual increase in nearly 40-1/2 years, suggesting that the Federal Reserve could continue with its 50 basis points interest rate hikes through September to combat inflation, Reuters reported.

Inflation increased 1.0% last month after gaining 0.3% in April. This was higher than the 0.7% forecast from a Reuters economists poll.

Reuters added that the broadening and relentless price pressures are forcing Americans to change their spending habits, along with heightened fears of either an outright recession or a period of very slow growth.

Back home, the local statistics authority released last month’s inflation report on Tuesday.

The consumer price index accelerated by 5.4% year on year, the highest level in three and a half years, driven by high food and transport costs.

This matched the median estimate in a BusinessWorld poll. It was also within the midpoint of the 5-5.8% forecast range given by the Bangko Sentral ng Pilipinas (BSP) for the month.

In a briefing earlier last week, BSP Governor Benjamin E. Diokno said that the central bank would continue to review the inflation and growth outlook ahead of the June 23 policy meeting.

The Monetary Board in its May 19 meeting hiked benchmark interest rates for the first time since 2018 by 25 basis points to combat rising inflationary pressures.

Timson Securities’ Mr. Lood said that the rise in crude oil prices and “risky” US treasury yields could also fuel concerns about inflation and the outlook for interest rates. — Luisa Maria Jacinta C. Jocson with Reuters

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