THE stock market could receive a boost from a Bangko Sentral ng Pilipinas (BSP) policy meeting this Thursday amid lingering fears of a recession in the United States, analysts said.
Worries over the state of the US economy saw the Philippine Stock Exchange index plunge to the 6,400 level last Monday, but it still managed to end the week up 0.6 percent at 6,647.80.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the BSP could start easing policy by announcing a 25-basis-point rate cut on August 15, acting ahead of the US Federal Reserve (Fed) that is expected to move in September.
Any impact can be managed as "the interest differential would eventually be maintained," he added.
Philstocks Financial Inc. senior research analyst Japhet Tantiangco, meanwhile, said "a policy rate cut is expected to sustain the local market's upward momentum while an unchanged policy rate might lead to a market decline."
He added that investors would also be monitoring developments in Wall Street as "further easing of recession concerns is seen to help in lifting market sentiment while a worsening of the said concerns is expected to weigh on the market."
Wall Street's top indices opened lower on Friday after rallying a day earlier on unemployment data that soothed concerns that the world's top economy was set to slump into a downturn.
Stocks regained ground later, ending the day higher with the broad-based S&P 500 and tech-heavy Nasdaq both gaining 0.5 percent.
The reaction to the Thursday unemployment data was in marked contrast to separate US employment numbers a week ago that triggered massive selling across markets at the start of the week.
Since then, equities have seen big fluctuations as traders seek to get hold of the economic outlook for the United States and elsewhere.
Online brokerage firm 2TradeAsia.com advised investors to "expect more volatility in the coming sessions," especially with the release later this month of the minutes from last month's Fed policy meeting and US second quarter growth data.
"US July inflation will be reported [on August 14, US time], a much anticipated data point for global markets ahead of the FOMC's (Federal Open Market Committee) September policy meeting," the firm said.
"Yields are penciling in a 50-bps cut next month, but ultimately the decision rests on upcoming jobs and price data — made more critical after an earlier week jobs report triggered a recession indicator, spooking markets," it added.
2TradeAsia further noted that "investor psyche is expected to remain glued to the BSP's move — an off-cycle rate cut will rouse animal spirits in equities, but pragmatism dictates a more neutral move is more likely in light of current data."
Sentiment could also be boosted by earnings results by a number of blue chip firms, including Ayala Corp., San Miguel Corp., JG Summit Holdings Inc., GT Capital Holdings Inc., LT Group Inc. and PLDT Inc.
Analysts said that immediate support this week would be at 6,400-6,500 while resistance was seen at 6,665-6,800.
WITH A REPORT FROM AGENCE FRANCE-PRESSE
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