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Markets cheer signs consumption rising

Governing Council of the European Central Bank left all key policy parameters unchanged at its meeting, as expected.

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Benchmark index climbed above the 6,900 level to finish the week as investors shrugged off a key inflation report that showed a bigger-than-expected increase in price pressures.
The market was in the green for the third straight week.

May core consumer price index in the United States rose by 0.74 percent month-over-month, a third consecutive beat, reflecting another round of reopening effects and further upward pressure on auto prices related to the semiconductor shortage, Regina Capital Development Corp. managing director Luis Limlingan said.

Underlying inflation was mixed, with shelter inflation firming but healthcare prices declining.

In other market making news, the Governing Council of the European Central Bank left all key policy parameters unchanged at its meeting, as expected, but expressed some concern about tighter financing conditions in the run-up to the meeting and therefore pledged to maintain purchases at a “significantly higher pace” than at the beginning of the year.

Rally continues

The Philippine Stock Exchange index was higher by 32.08 points or 0.47 percent to finish the week at 6,907.79 after trading between 6,872.59 and 6,910.33 involving 97,687 shares valued at P5.428 billion.

Top movers were SM (+1.0 percent to P1,019), Ayala Land Inc. (+1.6 percent to P38.30), and Ayala Corp. (+1.2 percent to P818.00).

The three issues accounted for 26.5 points.

Data overnight showed the US consumer price index posted its biggest year-on-year increase since August 2008 at five percent, following a 4.2 percent rise in April. However, there were hefty contributions from short-term rises in airline ticket prices and used cars, raising some doubts about underlying inflationary pressures.

At the same time, US Labor Department data showed the lowest level of new claims for unemployment benefits in nearly 15 months last week.

“Last night’s print is just one in a long string of evidence that inflation is not just rising, but is more than just transitory base effects,” said Rob Carnell, Asia-Pacific chief economist at ING in Singapore.

“But the Fed, which meets next week, can still point to no deviation of inflation expectations to back up its continued mantra of transitory inflation. The market is buying that for now, he added.

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