Global stocks edge up despite tariff uncertainty

Global and Philippine Market Update
March 20 to March 26, 2025

Global Markets

Global Stocks gained slightly amid hopes for softer tariff policies.

• Global stocks slightly climbed after a previous rally fueled by hopes that U.S. President Donald Trump might adopt a more cautious stance on tariffs. European shares led the rise, and Wall Street stocks ended with modest gains. Trump signaled that some threatened tariffs might not be imposed on April 2, providing optimism to markets, although consumers remain pessimistic about income prospects and tariffs.
  
  
• S. Treasury yields dipped slightly as investors weighed the impact of tariffs on Federal Reserve policies, with some Fed officials commenting on slowed inflation progress and economic uncertainty.
  
  
• President Trump announced a 25% tariff on foreign-made cars, light trucks, and specific auto parts, effective April 2. This move aims to boost domestic production and generate revenue of over $100 billion annually. While U.S.-built cars are exempt, the tariffs combined with existing duties, are expected to disrupt global supply chains, as most vehicles rely on internationally sourced parts. European Commission President Ursula von der Leyen criticized the decision, highlighting its negative economic impact on businesses and consumers in both the U.S. and EU. Following the announcement, auto stocks like General Motors, Stellantis, and Ford plummeted in after-hours trading, reflecting heightened market uncertainty.

Philippine Stocks

Philippine Stocks continued to decline as investors fret over Trump’s tariff fears.

• Philippine stocks continued their downward trend as investor sentiment remained dampened by President Trump's looming tariff threats. The proposed tariffs target key industries such as automobiles, pharmaceuticals, and semiconductors, further intensifying global market apprehensions. Additionally, Trump's announcement of secondary tariffs on nations purchasing oil from Venezuela exacerbated economic uncertainties, pushing oil prices higher and fueling concerns over the broader economic impact.
  
  
• Moody’s Analytics adjusted its economic growth forecasts for the Philippines to below 6% for 2025 and 2026, citing uncertainties arising from US tariff policies. Despite this, the Philippines is expected to remain one of Southeast Asia’s fastest-growing economies due to robust private consumption and investment, aided by stable inflation and easing monetary policies.
  
  
• The US tariffs have a moderate direct impact on the Philippines since the country is less reliant to exports compared to other Southeast Asian nations. However, the reciprocal tariffs could harm exporters. Meanwhile, structural reforms across Southeast Asia, supported by the IMF, could boost long-term economic growth.

Philippine Bonds

Philippine Bond yields remained mixed ahead of BSP Meeting.

• The Philippine government successfully raised funds in Treasury bond auctions last Tuesday, navigating mixed yield trends. The Bureau of the Treasury secured Php 10 billion through three-year T-bonds, with bids exceeding the issuance size by more than four times. The average yield for these bonds settled at 5.779%, lower than previous auction yields and secondary market rates, influenced by BSP Governor Eli Remolona Jr.'s signals of a potential policy rate cut. Additionally, the Bureau sold ₱25 billion in 25-year T-bonds, attracting tenders 1.4 times larger than the issuance size. However, the average yield for these long-term bonds rose to 6.476%, reflecting higher borrowing costs in the market.

• The Bangko Sentral ng Pilipinas (BSP) is anticipated to lower interest rates by up to 100 basis points in 2025, driven by easing inflation and a stable economic outlook. Analysts highlight that inflation remains within the BSP's target range of 2-4%. BSP Governor Eli M. Remolona has signaled the continuation of an easing cycle, with a potential 25-basis-point cut in April. This monetary policy aims to support economic growth while maintaining inflation control.

• Economic growth in the Philippines is expected to benefit from robust consumption, aided by lower inflation and interest rate cuts. However, fiscal policy remains tight as the government seeks to reduce pandemic-induced debt levels. Capital Economics notes that the Philippines' relatively closed economy shields it from external risks such as U.S. tariff policies, although potential impacts on remittances from the U.S. could pose challenges.

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://www.reuters.com/markets/global-markets-wrapup-1-2025-03-25/ (2) https://www.cnbc.com/2025/03/26/trump-could-sign-new-auto-tariffs-as-soon-as-wednesday-white-house-says.html (3) https://www.bworldonline.com/stock-market/2025/03/25/661711/phl-stocks-extend-decline-as-tariff-worries-linger/ (4) https://www.bworldonline.com/top-stories/2025/03/27/662026/moodys-unit-cuts-phl-growth-outlook/ (5) https://www.bworldonline.com/banking-finance/2025/03/26/661616/treasury-fully-awards-dual-tenor-bond-offer/ (6) https://www.bworldonline.com/economy/2025/03/26/662037/bsp-seen-cutting-rates-by-as-much-as-100-bps/

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.