Local stocks advanced for a second day and returned to the 6,600 territory yesterday, as markets bet on the central bank to put a stop on its interest rate hikes.

The benchmark Philippine Stock Exchange index (PSEi) closed at 6,635.11, up by 46.21 points or 0.70 percent, while the broader All Shares index rose to 3,533.84, up by 14.48 points or 0.41 percent.

Analysts are expecting the Bangko Sentral ng Pilipinas (BSP) to hold its key policy rates at 6.25 percent in today's Monetary Board meeting as inflation continue to ease amid slower economic growth in the first quarter.

Around Asia, shares were subdued as investors remained risk averse, with the US debt ceiling talks and a mixed set of economic data weighing on sentiment.

President Joe Biden and top congressional Republican Kevin McCarthy edged closer to a deal to avoid a looming US debt default. Without an agreement, in about two weeks, the government might not be able to pay its bills, with economists fearing the country will likely slide into a recession.

As the deadline approaches, 'one thing investors can be certain of is that more uncertainty lies ahead,' said Saira Malik, chief investment officer at Nuveen. Malik expects further volatility across equity and fixed income markets until there is greater clarity on the outcome of the negotiations.

Recent economic data indicates slowing in the US economy following a string of rate hikes by the Federal Reserve to fight high inflation. Markets are pricing the Fed to cut rates towards the end of the year, according to CME FedWatch tool, but some Fed officials have stuck to a hawkish rhetoric.

Atlanta Fed president Raphael Bostic said the Fed would need to stay 'super strong' in fighting inflation even if the unemployment rate starts to rise later in the year, while Chicago Federal Reserve President Austan Goolsbee said it was premature to be discussing interest rate cuts.

'While the market narrative is that a recession is inevitable, especially in the US, economic data continues to be mixed with seemingly sufficient evidence to support both bulls and bears' outlook,' said Thomas Poullaouec, head of multi-asset solutions APAC at T. Rowe Price.


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