SHARES fell on Thursday as the US Federal Reserve remained hawkish and amid expectations of faster Philippine inflation last month.

The Philippine Stock Exchange index (PSEi) fell by 0.8% or 53.94 points to end at 6,646.55 on Thursday, while the broader all shares index dropped by 0.6% or 21.36 points to close at 3,504.58.

“This Thursday, the local market dropped by 53.94 points (-0.8%) to 6,646.55 as investors worry that inflation for April may grow faster than March’s 3.7% and even exceed the upper end of the government’s target range based on the Bangko Sentral ng Pilipinas’ (BSP) latest forecast,” Philstocks Financial, Inc. Research and Engagement Officer Mikhail Philippe Q. Plopenio said in a Viber message.

“Adding to the woes was the Fed’s statement, which expressed the lack of greater confidence on the US’ inflation. The statement further tempered early rate-cut hopes from the Fed and consequently the BSP. It also caused concerns towards the local currency, which has an effect on the local bourse,” he added.

The BSP’s month-ahead forecast showed that inflation likely settled within the 3.5%-to-4.3% range in April. This is slower than the 6.6% print in April 2023.

The upper end of the forecast would exceed the 2-4% target band for the first time in four months. On the other hand, the lower end would be slower than the 3.7% inflation recorded in March.

Meanwhile, the US Federal Reserve held interest rates steady on Wednesday and signaled it is still leaning towards eventual reductions in borrowing costs, but put a red flag on recent disappointing inflation readings that could make those rate cuts a while in coming, Reuters reported.

Indeed, Fed Chair Jerome H. Powell said that after starting 2024 with three months of faster-than-expected price increases, it “will take longer than previously expected” for policy makers to become comfortable that inflation will resume the decline towards 2% that had cheered them through much of last year.

“Local shares declined for the second consecutive day as investors processed news of resumed talks on a minimum wage hike, which could potentially impact companies’ financial performance,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan added in a Viber message.

Holding firms dropped by 2.05% or 127.10 points to 6,062.67; industrials retreated by 1.76% or 158.95 points to 8,855.39; property went down by 1.28% or 32.11 points to 2,477.38; mining and oil declined by 0.95% or 83.42 points to 8,701.16; and financials inched down by 0.33% or 7.1 points to 2,087.10.

Meanwhile, services rose by 2.11% or 39.28 points to 1,896.18.

Value turnover dropped to P4.77 billion on Thursday with 501.32 million issues switching hands from the P22.31 billion with 1.5 billion shares traded on Tuesday.

Decliners beat advancers, 110 to 76, while 54 issues closed unchanged.

Net foreign selling fell to P87.84 million on Thursday from P16.58 billion on Tuesday. — R.M.D. Ochave with Reuters