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Stock market down on profit taking despite lower inflation

By Jenniffer B. Austria

Stock market down on profit taking despite lower inflation

Share prices succumbed to profit-taking Friday despite the release of government data showing a slower inflation rate in June 2024.

The Philippine Stock Exchange index ended the week at 6,492.75, down by 14.74 points, or 0.23 percent from previous trading, while the broader all-shares index lost 6.88 points, or 0.20 percent, to finish at at 3,508.99.

The market was trading in the green for most of the day after the government reported that June inflation eased to 3.7 percent from 3.9 percent in May.

The latest figure brought the first-half average inflation to 3.5 percent, which is within the government’s 2024 target range of 2 percent to 4 percent.

Investors, however, took profits towards the market close after two straight days of rally.

Philstocks Financial Inc research analyst Claire Alviar said sentiment was dampened by the national government’s rising outstanding debt.

Government debt surged by 8.4 percent to reach a record P15.35 trillion as of end-May 2024 on continued borrowings and depreciation of the peso.

Sectoral indices ended mixed, with services declining by 1.43 percent. Mining and oil and industrial also dropped by 0.49 percent and 0.16 percent, respectively.

Financials rose 0.22 percent, while proper and holding firms advanced by 0.21 percent and 0.15 percent, respectively.

Value turnover hit P4 billion, while foreign investors were net sellers by P11.47 million.

Meanwhile, Asian markets were largely down on Friday, a day after Tokyo’s indexes hit record highs as traders prepared for a key US jobs report while European exchanges edged up on calming electoral news from the United Kingdom and France.

Japan’s Nikkei 225 ended flat while the broader Topix index, which a day earlier surpassed its previous peak set in 1989, also shed some of its gains.

“The fact that the Topix, which indicates the overall performance of the Japanese market, has in turn broken its own record, is news of great importance,” said analyst Takuma Ikemoto of the Tokai Tokyo Intelligence Lab.

The capitalization of Japan’s Prime market has also increased significantly, showing “that Japanese companies are constantly strengthening their ability to generate profits and… indicates that the Japanese stock market has entered a new phase”, he said.

The yen continued strengthening against the dollar after hitting its lowest level in nearly four decades.

Samsung Electronics’ forecast that second-quarter profits would beat expectations by more than 25 percent, due to rising chip prices and growing demand for generative AI, sent its share price higher and spurred the market in Seoul.

But shares in Hong Kong ended a four-day winning streak, while stocks in mainland China were trading lower after the European Union slapped extra provisional duties of up to 38 percent on Chinese electric car imports on Thursday.

A European Commission probe launched last year concluded that state subsidies for Chinese EV manufacturers were unfairly undercutting European rivals, which Brussels wants to shield as they transition from thermal to electric power.

Chinese markets have suffered losses for weeks, with the world’s second-largest economy beset by a debt crisis in the property sector, persistently low consumption and high youth unemployment.

European markets built on gains Friday after a Labour win in the UK and moves to block a far-right ascent in France.

London, Paris and Frankfurt all moved higher in early trading.

The return of the main opposition Labour Party to power in Britain ended 14 years of Tory rule and strengthened the pound even before results were announced.

An expected period of stability has ushered in optimism for investors after a prime ministerial game of musical chairs in Downing Street.

In France, the withdrawal of 200 centrist and left-wing candidates from this weekend’s runoff to avoid splintering the vote in favor of the far-right National Rally of Marine Le Pen boosted the euro and breathed life into European markets.

But analysts remain wary that the second-biggest economy in the European Union could be headed for a period of political deadlock if there is no overall winner in the polls.

Investor sentiment was also lifted Thursday as softer US labour market data gave the Federal Reserve room to cut interest rates, with another key jobs report due Friday.

“We expect US labour market data will show more signs of cooling in June,” Alvin Tan of RBC Capital Markets said.

Gains were capped, with Wall Street shut for the July 4 Independence Day holiday in the United States.

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