Markets show positive trends as inflation eases

Global and Philippine Market Update
Oct. 3 to Oct. 9, 2024

Global Stocks

Global Stocks surged amid easing inflation.

• The minutes from the Fed’s September meeting revealed that a “substantial majority” of officials favored a significant half-point rate cut. However, there was a consensus that this decision wouldn’t lock the Fed at a specific pace for future cuts. This week, trading was volatile as investors recalibrate their rate-cut expectations following a surprisingly robust September jobs report, indicating the U.S. economy is healthier than anticipated.

• Asian stocks rallied, driven by strong US labor market data that eased recession fears and reduced rate-cut expectations. US Treasury yields hit two-month highs, while crude oil prices eased despite Middle East tensions. Japan’s Nikkei led gains, supported by a weaker yen, and the US dollar reached a seven-week peak against the yen.

• Chinese investors are eagerly awaiting more policy guidance from the country’s top economic planning body, as mainland markets reopen after a week-long holiday. Major Chinese indexes have surged over 25%, buoyed by a series of stimulus measures. Last week, the CSI 300 blue-chip index extended its nine-day winning streak, jumping over 8% on Monday before the holiday closure. Meanwhile, Hong Kong stocks resumed trading last Wednesday and surpassed 23,000 on Monday for the first time since 2022.

Philippine Stocks

Philippine Stocks continued to rise, driven by a significant slowdown in inflation.

• Philippine shares soared to the 7,500 mark, achieving their highest close since January 2020. This surge was driven by a slowdown in inflation to its lowest level over four years in September, providing the central bank with room to further reduce borrowing costs. Strong buying interest, bolstered by net foreign inflows of P1.35 billion, pushed the market to its best close since January 27, 2020, as investors responded to the unexpectedly low Philippine inflation and a positive U.S. jobs report.
• Philippine shares could continue to rise this week after September’s headline inflation fell below 2% for the first time in over four years, increasing expectations of further interest rate cuts by the Bangko Sentral ng Pilipinas (BSP). Despite some profit-taking, the local market still ended the week with gains, closing above 7,400.

Philippine Bonds

Philippine Bond yields are expected to gain due to potential interest rate cuts.

• Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. mentioned that slowing inflation has provided the central bank with the opportunity to gradually ease monetary policy. In an interview with Global Finance, he stated that even if certain risks arise, inflation is expected to average 3.3% this year, 2.9% in 2025, and 3.3% in 2026, all within the BSP’s target range of 2.0% to 4.0%. “With inflation now on a target-consistent path, we have room for a calibrated shift to a less restrictive monetary policy stance,” he added.

• PH sovereign bonds are expected to gain as falling rice prices help lower inflation, supporting potential interest-rate cuts. With inflation hitting a four-year low in September, HSBC Holdings Plc predicts that the Philippines will benefit significantly from India’s easing of rice export restrictions, given rice’s 9% weight in the country’s consumer price inflation basket.

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/us/futures-slip-markets-await-fed-minutes-alphabet-drops-2024-10-09/ (2) https://www.manilatimes.net/2024/10/08/business/foreign-business/asian-stocks-rise-on-us-labor-data/1980346 (3) https://www.bworldonline.com/stock-market/2024/10/07/626295/psei-ends-above-7500-posts-near-five-year-high/ (4) https://www.bworldonline.com/stock-market/2024/10/06/626022/stocks-may-extend-climb-on-slower-sept-inflation/ (5) https://www.manilatimes.net/2024/10/10/business/top-business/remolona-sees-room-for-calibrated-easing/1982088 (6) https://www.bloomberg.com/news/articles/2024-10-10/philippine-bonds-seen-getting-tailwind-from-falling-rice-prices (7) https://www.cnbc.com/2024/10/07/china-stocks-poised-to-reopen-with-markets-fixated-on-fiscal-stimulus.html

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.