Market volatility expected to continue as Trump’s tariff plans unfold

Global and Philippine Market Update
March 27 to April 2, 2025

Global Markets

Global Stocks were mixed as investors braced for Trump’s tariff rollout.

• Global markets experienced a renewed wave of volatility ahead of Trump’s tariff rollout. Stocks erased losses at the final stretch of a jittery quarter, while bonds moved away from session highs and gold reached a record high.

• Futures for major U.S. indexes (Dow, Nasdaq, S&P 500) have also slid following last week's sell-offs. Asian markets, including China's CSI 300, Hong Kong's Hang Seng, and Japan's Nikkei 225, experienced notable drops, as did South Korea's KOSPI. European indexes, like the Euro Stoxx 50 and FTSE 100, similarly fell.

• Economists warn these tariffs could increase the risk of a recession in 2025. Additionally, concerns about retaliatory measures from America's trade partners add to the unease. Investors are increasingly turning to safe-haven assets which in turn are driving gold prices to a record high and lowering U.S. Treasury yields.

Philippine Stocks

Philippine Stocks rose as inflation expectations strengthened hopes for rate cuts.

• Philippine stocks climbed amidst anticipation of slower March headline inflation, which could pave the way for a BSP rate cut next week. Analysts attributed the rise to expectations that inflation remained low in March, potentially giving the BSP more leeway to reduce policy rates this April. The Philippine Statistics Authority is set to release the March consumer price index (CPI) data on April 4, with forecasts from BSP suggesting inflation between 1.7% and 2.5%. If realized, these figures would reflect a significant slowdown from March 2024’s 3.7% inflation rate.

• The Trump administration’s planned imposition of reciprocal tariffs on trade partners is expected to have a relatively mild impact on the Philippines. Analysts highlighted that the Philippines’ low tariff differential with the US and the smaller share of trade in its GDP offer some protection. The U.S remains a key market for Philippine exports, particularly electronics, which account for over half of its total exports in 2024. Former Tariff Commissioner George N. Manzano noted that electronics exports, which benefit from low or duty-free tariffs under the Information Technology Agreement, are unlikely to see significant tariff increases. However, BMI Country Risk Analyst Shi Cheng Low warned that higher tariffs could make Philippine goods less competitive in the U.S., reducing demand. Uncertainty over the tariffs’ full impact persists, and experts advocate for diplomatic negotiations to mitigate trade barriers.

Philippine Bonds

Philippine Bond yields showed mixed movement.

• Yields in the Philippine secondary market were mixed last week, driven by dovish remarks from the BSP, the recent RRR cut, and uncertainty over US tariff policies. On average, GS yields rose by 0.32 basis points (bps) week-on-week, with short-term T-bill rates increasing across all tenors. The 91, 182, and 364-day T-bills rose by 12.09 bps, 9.05 bps, and 8.86 bps, respectively. In contrast, yields on medium-term Treasury bonds (T-bonds) declined across all tenors, with the two to seven year bonds falling by 2.99 to 6.32 bps. Long-term tenors showed mixed results, with the 20 and 25-year bonds rising slightly, while the 10-year bond yield fell by 2.35 bps.

• Analysts expect yields to remain subdued in the short term but anticipate upward movement later in the week as markets react to March inflation data and US tariff policy disclosures. A lower-than-expected March inflation print could support a bullish outlook for bonds and reinforce expectations of a BSP rate cut at its April meeting.

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.bworldonline.com/stock-market/2025/04/02/663489/stocks-rise-as-inflation-bets-boost-rate-cut-hopes/, (2) https://www.bworldonline.com/banking-finance/2025/03/31/662577/yields-on-government-debt-end-mixed-on-dovish-bsp-bets-tariff-uncertainty/ (3) https://bloomberg.com (4) https://www.bbc.com/news/articles/czjny8kee1zo

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.