Economy remains resilient amid market challenges

Global and Philippine Market Update
Sept. 26 to oct. 2, 2024

Global Stocks

Global Stocks achieved gains amid facing geopolitical challenges.

• Stocks managed to gain in the final minutes of US trading, despite Federal Reserve Chair Jerome Powell indicating no rush to cut interest rates further. Powell mentioned that the central bank would lower rates “over time,” while emphasizing the overall strength of the economy. He also indicated that if economic data remains stable, there are likely to be two more rate cuts this year, but in smaller increments of a quarter percentage point. This contrasts with market expectations for more aggressive easing.

• US stocks ended slightly higher on Wednesday as traders anticipated key economic data in the US and looked past simmering tensions in the Middle East. The major indexes edged up, clawing back losses from declines earlier in the day. Investors were rattled after Iran launched a missile attack on Israel, sparking a move to safe-haven assets.
• Despite PM Ishiba’s dovish comments causing a sharp decline in yen to 147.15 against USD, analysts expect the Bank of Japan to continue its rate hikes, possibly in October or early next year, due to an optimistic economic outlook. The BOJ’s next policy review is on October 30-31.

Philippine Stocks

Philippine Stocks continued to rise amid expectations of further rate cuts.

• Philippine stocks could continue their upward trend due to dovish policy forecasts and a more optimistic outlook from businesses and consumers for the fourth quarter (Q4), analyst said. “Bulls flocked to the local equity market, driven by last week’s 50-basis-point rate cut by the Federal Reserve and comments from the Bangko Sentral ng Pilipinas (BSP) chief about the possibility of two more rate cuts this year.”

• The local stock market retreated from its recent highs, after several days of being overbought, primarily due to last-minute selling of major index stocks. Alfred Benjamin Garcia, research head at AP Securities Inc., noted that this correction was anticipated for some time and is a necessary pullback from overbought levels.

Philippine Bonds

Philippine Bond yields are expected to continue trending lower as inflation eases.

• Inflation likely fell below 3% in September, according to the Bangko Sentral ng Pilipinas (BSP), due to declining food and fuel costs. The central bank’s forecast for the month indicated that inflation probably settled within the 2-2.8% range, down from 3.3% in August and 6.1% a year ago. The BSP attributed the downward pressure on prices to negative base effects, lower prices of food commodities such as rice, meat, and vegetables, reduced domestic oil prices, and the appreciation of the peso.

• The Dept. of Agriculture expects rice imports in 2024 to potentially exceed the 3.6 million metric tons imported in 2023, aiming to stabilize supply despite weather challenges. As of late September, imports have reached 3.195 million metric tons. Despite PhP15.3 billion in agricultural damage from El Niño, the DA is optimistic about matching or surpassing last year’s 20 million metric tons of rice production.

FWD Guidance: Uncertainty leads to downside risks, but diversification and a long-term investment horizon still provide the best chance for financial success.

Sources: (1) https://finance.yahoo.com/news/japan-stocks-poised-fall-rate-224912045.html (2) https://www.cnbc.com/2024/10/02/yen-plunges-but-currency-experts-not-rethinking-japans-rate-policy.html (3) https://www.bworldonline.com/stock-market/2024/09/29/624505/psei-may-advance-on-more-upbeat-q4-outlook/ (4) https://business.inquirer.net/483045/psei-tumbles-by-2-1-as-shares-retreat-after-bullish-breakout (5) https://www.bworldonline.com/top-stories/2024/10/02/625161/inflation-likely-below-3-in-sept-bsp/ (6) https://business.inquirer.net/483261/da-higher-rice-imports-in-2024-possible (7) https://markets.businessinsider.com/news/stocks/stock-market-today-sp500-iran-israel-jobs-report-economy-outlook-2024-10

Disclaimer: The purpose of this article is to inform and should not be taken as an advice or offer to purchase securities. Seek professional advice before making a decision based on this presentation. Information given does not represent the views of FWD and its agents and employees.