Banking crisis fades for global markets, but local stocks weighed down by higher oil prices

Global and Philippine Market Update
March 30 to April 4, 2023

Global Markets

Global Stocks gained as inflation continues to ease and the economy slows down.

• The personal consumption expenditure (PCE) price index increased by 4.6%, year on year, in February. This is a slightly lower than the January level. PCE is a closely followed inflation gauge by the Federal Reserve (Fed) and its downward trend shows that interest rate hikes are impacting prices. There is a good chance that inflation will be below 4% by the end of the year.

• The US labor department reported that available job openings dropped to 9.93 million, according to its monthly Job Openings and Labor Turnover Survey (JOLTS). This is the first time in nearly two years that vacancies fell below 10 million. The Fed has been targeting the hot-labor market to bring down inflation. This report is another positive sign that the economy is slowing down.

Philippine Stocks

Philippine Stocks retreated over concerns that higher oil prices will keep inflation elevated.

• The Philippine Stock Exchange index (PSEi) fell as negative sentiment grew from the surprise cut in oil production by members of the Organization of Petroleum Exporting Countries (OPEC). Brent Crude jumped to trade around $85 a barrel from below $80 after the announcement. Trading has been thin and investor interest in the market is low due to the Lenten break.

• The Asian Development Bank (ADB) maintained its 6% growth forecast for the Philippines this year. This is within the government’s 6-7% target and makes the Philippines the second fastest growing economy in Southeast Asia. ADB also expects the growth momentum to continue into 2024 as it projects an expansion of 6.2%. Public infrastructure spending will be key to growth amid elevated inflation levels and a likely global slowdown.

Philippine Bonds

Philippine Bond Yield curve rose in the short end following the Bangko Sentral ng Pilipinas’ (BSP) rate hike, while the long end continues to dip due to easing inflation.

• Inflation slowed down to 7.6% in March from 8.6% in February, according to the Philippine Statistics Authority. This was slower than expected, as analysts forecasted inflation at 8%, while BSP’s estimate is at 7.8%. The lower print was mainly due to slower price increase in food and non-alcoholic beverages as well as transport and housing.

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.cnbc.com/2023/03/31/fed-inflation-gauge-february-2023-.html (2) https://www.cnbc.com/2023/04/04/jolts-february-2023-.html (3) https://www.bworldonline.com/top-stories/2023/04/05/515143/adb-keeps-6-phl-growth-outlook/ (4) https://www.bworldonline.com/stock-market/2023/04/04/515105/psei-drops-as-market-awaits-march-inflation-data/ (5) https://business.inquirer.net/394760/philippine-inflation-slowed-to-7-6-in-march

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.