Markets leap on hopes end of Fed hikes nears

MANILA, Philippines — Asian markets leapt yesterday on optimism that the Federal Reserve’s long-running campaign of interest rate hikes could be near an end after data showed US inflation rose less than expected last month.

The benchmark Philippine Stock Exchange index rallied by 1.73 percent to 6,578.49 while the broader All Shares index gained 1.15 percent to close at 3,497.06.

Led by the financial sector, all sub-indexes finished in positive territory yesterday.

A total of P6 billion worth of shares changed hands, with advancers outnumbering decliners, 114 to 69, while 48 issues were unchanged.

The bourse stayed in the green for the whole day, extending its rise since the start of the week,” said Mikhail Plopenio of Philstocks Financial.

Traders already had a spring in their step this week on signs that the US central bank’s monetary tightening measures were kicking in, fanning speculation that this month’s expected hike could be the last of an elongated cycle.

And the mood brightened further Wednesday when the US Labor Department said the consumer price index came in at three percent in June, the lowest since March 2021 and sharply down from four percent in May. The Fed’s target is two percent.

On top of that, the “core” rate, which excludes the volatile food and energy components and is seen as a better sign of underlying inflation, sank to its lowest since 2021.

The readings follow last week’s better-than-hoped personal consumption expenditures data – seen as the Fed’s preferred gauge – and stoked bets that it will hike just once more this month before calling it quits.

Analysts also pointed out that, while showing signs of softness, the economy remained in rude health and the labor market was still robust, suggesting the recession many had feared earlier this year could be avoided.

“The economy is defying predictions that inflation would not fall absent significant job destruction,” Lael Brainard, director of the National Economic Council and a former Fed vice chair, told the Economic Club of New York.

Also Wednesday, the Fed’s “beige book” survey of the economy showed activity had improved since late May thanks to strong tourism and travel.