Equity markets move higher as economy shows signs of resiliency

Global Markets 

Global Stocks continued to trend higher as business activity and retail consumption remains strong.

• The US services sector surprisingly grew in July on the back of strong business activity. The better-than-expected data eased concerns of a slowdown in the economy. The Institute for Supply Management’s (ISM) index rose to 56.7 from 55.3 the previous month. A reading above 50 indicates growth. Thirteen service industries in the ISM survey reported growth in July, led by mining and real estate, while only three industries declined.
• The earnings season continues with Starbucks reporting numbers that suggest no change in customer spending. This bodes well for consumption as higher prices have not prevented consumers from buying goods and services. JP Morgan and Capital One also reported increased credit card balances. This is another encouraging sign that retail consumption is resilient.
• Louis Federal Reserve President James Bullard stated that the US Federal Reserve (Fed) will continue hiking rates to combat inflation. He expects rates to stay higher for longer until there is clear evidence that inflation has eased. His statements are consistent with other officials of the Fed that believe in more monetary tightening.

Philippine Stocks

Philippine Stocks rallied as the economy remains on track for strong growth.

• Maybank Investment Banking Group lowered its growth forecast for the Philippines to 6.5%, to account for the risk of recession in the US, China and the European Union. However, this new forecast is still within the 6.5-7.5% target of the government. Maybank expects the Philippines to be the second fastest growing economy among the Association of Southeast Asian Nations (ASEAN), next only to Vietnam’s 6.9% forecasted growth. The Philippines is a domestic-driven economy, which minimizes the impact of global risks.
• Philippine manufacturing activity slowed but still expanded for the month of July. The S&P Global Philippines Manufacturing Purchasing Manager’s Index (PMI) report showed a reading of 50.8, lower than the 53.8 in June. A reading above 50 signals growth. This was taken as positive development since a contraction did not occur. Growth remains amid the high inflationary environment.

Philippine Bonds

Philippine Bond Yields ended with mixed results. Bonds with a maturity of one year or less continue to move higher while bonds with a maturity of longer than one year ended lower.          

• The Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla believes that the BSP has room to further hike rates without “killing” the economy. He stated that it is too early to say if the BSP will consider a pause in monetary tightening. He reiterated that the BSP will be data dependent and is ready to do whatever is necessary to ease inflation.

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.bloomberg.com/news/articles/2022-08-03/u-s-services-gauge-unexpectedly-advances-to-a-three-month-high (2)https://www.forbes.com/sites/jjkinahan/2022/08/03/starbucks-sales-stay-strong-as-consumers-continue-spending/?sh=3f0e932a6763 (3) https://www.cnbc.com/2022/08/03/feds-bullard-sees-more-interest-rate-hikes-ahead-and-no-us-recession.html (4) https://www.bworldonline.com/top-stories/2022/08/03/465642/phl-economy-seen-to-expand-6-5-this-year/ (5)https://www.bworldonline.com/stock-market/2022/08/02/465533/shares-up-on-pmi-data-firms-positive-q2-results/(6) https://www.bworldonline.com/top-stories/2022/08/03/465643/higher-rates-wont-kill-growth-bsp/

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The information here is compiled from various credible sources and is a summary of a particular period only. Though we strive to provide accurate and complete information, we cannot guarantee that this article will be error-free.