Markets steady on Fed relief and local bargain hunting

Global and Philippine Market Update
April 24 to April 30, 2023

Global Markets

Global Stocks steady on Fed relief.

• The Fed decided to leave US rates in the 5.25% to 5.5% range where they have been in since July. The stubbornly high inflation will keep rates elevated as rate cuts are being pushed back. There were speculations that the Fed might intervene by hiking rates again, but Powell refused to entertain talk that rates might actually need to go up again.

• Private payrolls increased 192,000 last month versus the consensus of 183,000 after an upward revision to the prior month, according to figures published Wednesday by the ADP Research.

• The labor market has remained more resilient than economists anticipated over the last few months. Despite elevated interest rates, there has been a consistently healthy demand for workers and low levels of unemployment, which have helped fuel consumer spending and keep prices elevated.

• The OECD raised the 2024 global growth forecast to 3.1% from 2.9% in February — with notable improvements in its expectations for the US, China and India. The expansion should continue at 3.2% next year.

Philippine Stocks

Philippine Stocks back to 6,700 level on bargain hunting.

• We saw the index back at 6,700 level again as investors chased low prices and positive sentiment in the US spilled over to the local market.

• The US Federal Reserve kept its target rate at 5.25%-5.5% for a sixth straight meeting amid sticky inflation. The Bangko Sentral ng Pilipinas is expected to follow suit and keep its policy rate at a 17-year high of 6.5% for a fifth straight time at its own meeting on May 16 due to elevated prices of key commodities like rice due to the impact of El Niño.

• Philippine economic growth in the first quarter may have settled between 5.8% and 6.3%. Anything higher than 5.5% is a win because last year we grew by 5.5%, according to Finance Secretary Ralph Recto.

• Hot money outflows rose to $236M in March, significantly higher than the $70.26 million outflows in the same month a year ago.

Philippine Bonds

Philippine Bond remained elevated on sticky inflation.

• The Bangko Sentral ng Pilipinas (BSP) expects inflation to settle within the 3.5%-to-4.3% range in April. Headline inflation accelerated for a second straight month to 3.7% in March.

• The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) reported that the condition of the sector further improved in April 2024. The country’s manufacturing PMI, a gauge of the sector’s performance, increased to 52.2 in April from a modest score of 50.2 in March this year.

• S&P Global noted that growth in new orders in April was the fastest rate since November 2023. The S&P Global economist also said that inflationary pressures remained subdued in April, which is expected to support growth in the coming months as manufacturers were able to price their output more competitively.

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-1pix-2024-05-02/ (2) https://www.reuters.com/markets/us/feds-powell-says-looming-election-wont-sway-rate-decisions-2024-05-01/ (3) https://www.bloomberg.com/news/articles/2024-05-01/us-companies-added-192-000-jobs-last-month-adp-data-show (4)https://www.bloomberg.com/news/articles/2024-05-02/world-economy-looks-to-dodge-stagflation-rut-as-outlook-perks-up (5) https://www.bworldonline.com/stock-market/2024/04/29/591642/bargain-hunting-lifts-pse-index-to-6700-level/ (6) https://www.bworldonline.com/top-stories/2024/05/01/592095/q1-gdp-likely-grew-by-5-8-6-3-says-recto/ (7) https://www.bworldonline.com/top-stories/2024/05/02/592268/hot-money-outflows-rise-to-236m-in-march/ (8) https://www.pna.gov.ph/articles/1223867

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.