Stocks, peso gain as U.S. inflation eases

The Philippine Stock Exchange Index (PSEi) rose 46.48 points, or 0.74 percent, to 6,302.50 on Wednesday, while the peso strengthened by 2.4 centavos to P61.686 per US dollar from Tuesday’s P61.71 close.

Softer-than-expected US inflation data boosted risk appetite and eased concerns over prolonged restrictive monetary policy. The US Consumer Price Index rose 3.5 percent year-on-year in June, below market expectations of 3.8 percent and down from 4.2 percent in May.

The local market tracked Wall Street’s overnight gains after the inflation report reinforced expectations that the US Federal Reserve may have greater room to ease policy in the coming months.

Trading subdued

Trading activity remained subdued, however, with net value turnover reaching only P4.11 billion, reflecting continued investor caution amid ongoing geopolitical tensions in the Middle East.

Despite the relatively light volume, foreign investors remained net buyers, posting net inflows of P280.04 million.

Sector performance was broadly positive, with Financials leading gains at 1.13 percent. Property, Industrial, Holding Firms and Services also advanced. The lone decliner was Mining and Oil, which slipped 0.61 percent amid profit-taking following recent gains linked to higher energy prices.

Among index constituents, DigiPlus Interactive Corp. surged 3.50 percent to P11.24, while Emperador Inc. declined 1.27 percent to P15.50.

In the foreign exchange market, the peso traded between P61.57 and P61.695 during the session, while the weighted average settled at P61.65 from P61.692 previously.

Total dollar-peso transaction volume rose to US$1.146 billion from US$995.3 million the previous day, indicating increased market participation.

Peso’s modest recovery

The peso’s modest recovery was largely driven by a softer US dollar following weaker-than-expected US inflation data. Lower-than-expected June inflation in the US raised expectations of future policy easing by the Federal Reserve.

Lower inflation typically reduces pressure on Treasury yields and the dollar, encouraging capital flows into emerging-market assets and currencies such as the peso.