Money and insurance

Global inflation continues to trend lower

Global stocks edged higher amid signs that central bank policies are working as intended.

Global and Philippine Market Update
July 6 to July 12, 2023

Global Markets

Global Stocks edged higher amid signs that central bank policies are working as intended.

  • US inflation eased further in June with a year-on-year increase of 3%, marking its lowest level since March 2021. When excluding food and energy, core inflation rose by 4.8% reaching its lowest level since October 2021. This data offers some relief to the Federal Reserve (Fed), allowing them more flexibility in their efforts to reduce inflation. It indicates a clear sign of progress in addressing inflationary pressures. However, analysts still anticipate another quarter-point rate hike when the Fed convenes in July.
  • US employment growth moderated in June, indicating a slight slowdown in the previously robust labor market. Non-farm payrolls increased by 209,000, falling short of the Dow Jones consensus estimate of 240,000. The unemployment rate also declined by 0.1% to 3.6%. Furthermore, average hourly earnings rose by 4.4% compared to the previous year. These figures suggest that the job market remains strong and is moving towards a more stable level. The solid performance of the job market challenge the notion of an impending recession. 

Philippine Stocks

Philippine Stocks remained rangebound amid lack of catalysts. 

  • Local equities traded sideways as investors engaged in bargain hunting and awaited new market drivers. The recent low inflation print further supported the argument for maintaining the current monetary policy in the upcoming Bangko Sentral ng Pilipinas (BSP) monetary board meeting. The attractive equity prices continue to provide support to the market. However, a significant upward movement would necessitate a catalyst to boost market confidence and generate momentum.
  • The government’s goal of achieving a 6% growth rate is facing challenges as household consumption is expected to weaken, even with inflation slowing down. The first quarter may have marked the peak of growth, as households transition towards a more “normal” pattern of consumption and savings. According to ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa, households are likely experiencing fatigue from the rapid pace of spending that occurred after the lockdown period.

Philippine Bonds

Philippine Bond yields trended higher in line with the spike in US treasury yields.

  • The Bureau of Treasury (BTr) fully awarded a fresh 15-year treasury bond at a coupon rate of 7%. This was 0.284% higher than the 6.716% yield quoted for similar tenor bonds in the secondary market. The higher yield was due to expectations that the Fed may continue hiking rates this year.
  • BMI Country Risk and Industry Research sees the Philippines as the sixth most vulnerable among 13 countries to El Niño. The country is expected to be affected by reduced rainfall which may significantly impact rice production. The last time this weather effect impacted the Philippines between 2015 and 2016, rice production dropped by 10%. This will likely induce inflationary pressures on food prices. 


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) (3) (5) (6)

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.