Markets rally on higher corporate earnings and easing tension in the Middle East

Global and Philippine Market Update
April 18 to April 24, 2024

Global Markets 

Global Stocks climbed on higher than expected corporate earnings.

• US earnings updates this week will be key to see if result will sustain the recent market rebound despite the higher-for-longer rate environment.

• According to market analysts, this week is important for markets, with big tech earnings and Friday’s key inflation data having the potential to redefine the near-term trajectory of the market.

• Tempered expectations for Fed interest-rate cuts have rattled US stocks the past few weeks. But history shows there may be nothing to fear. If the past is any guide, equity markets are likely to fare well in an era of higher-for-longer interest rates.

• Purchasing Managers Index surveys on Tuesday showed overall business activity in the euro zone and in Britain expanded at their fastest pace in nearly a year, while business activity cooled in the US. That divergence helped the euro nudge above $1.07 in Asia trade, its highest in more than a week.

• US gross domestic product and March personal consumption expenditure data due later this week will be crucial for the dollar and for investors' attempts to gauge the path of U.S. rates.

• Traders expect the Federal Reserve to start easing rates in September and ending the year with 42 basis points of cuts, down from previous bets for 150 bps.

Philippine Stocks

Philippine Stocks tracked Wall Street’s rally.

• The local market gained during the week, following positive cues from the US markets amid good initial earnings reports. Investors continue to buy stocks at bargain levels while awaiting catalysts.

• National Economic and Development Authority Secretary Arsenio M. Balisacan sees inflation to start easing in the second half of the year as food price pressures are seen to diminish. 2% - 4% is still a fighting target but they are closely watching the developments in the Middle East. If the oil prices are affected by these, there will be added inflationary pressure.

• Development Budget Coordination Committee (DBCC) revised its gross domestic product (GDP) growth target range to 6-7% this year from 6.5 -7.5% previously amid geopolitical tensions, price upticks, and trade restrictions.

Philippine Bonds

Philippine Bond yields continued to move higher as central banks maintain a tight monetary policy.

• The Bureau of Treasury (BTr) partially awarded a reissued 20-year treasury bond. Some participants remain cautious to load up on duration as they may still be tending losses from the increase in yields in the past month.

• The IMF projects the Philippine economy to grow by 6.2% this year, while the ADB forecasts economic growth to settle at 6%. The World Bank, expects the Philippine economy to grow by 5.9% in 2024.

• The National Government's (NG) budget deficit for March narrowed to P195.9 billion from last year’s P210.3 billion on the back of 11.32% year-over-year (YoY) revenue growth vis-à-vis a 3.18% increase in government spending. This led to a cumulative budget gap of P272.6 billion for the Q12024 period, marking a slight increase of 0.65% (P1.8 billion) from the P270.9 billion fiscal deficit recorded in the same period a year ago.

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) Bloomberg news US INSIGHT: Why the Fed’s Next Move Will Be a Big, Hawkish Pivot (2) https://www.reuters.com/markets/global-markets-wrapup-1-2024-04-24 (3) https://www.bworldonline.com/stock-market/2024/04/24/590622/phl-stocks-extend-rally-track-wall-streets-rise (4) https://www.bworldonline.com/top-stories/2024/04/24/590373/inflation-may-ease-in-2nd-half-neda/ (5) https://www.pna.gov.ph/articles/1223235 (6) https://www.treasury.gov.ph/?p=64399

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.