Global markets rally on potential end to global interest rate hikes

Global and Philippine Market Update
Nov. 2 to Nov. 8, 2023

Global Markets 

Global Stocks rallied.

• US gross domestic product (GDP) grew at an annualized pace of 4.9% in the third quarter. This sharp increase was attributed to contributions from consumer spending, increased inventories, exports, residential investments, and government spending. It marked the largest gain since the fourth quarter of 2021. Notably, personal consumption expenditures increased by 4% for the quarter, a substantial jump from the 0.8% rise in the second quarter. The report confirms the belief that consumers engaged in robust spending over the summer. Although the US has demonstrated resilience in the face of various challenges, most economists anticipate a considerable slowdown in the coming months.
• Chicago Federal Reserve (Fed) President Austan Goolsbee stated that a soft landing remains a possibility as the central bank aims to address inflation without causing significant harm to the economy. He highlighted that the decrease in price pressures thus far has been a notable achievement. It is unusual to achieve the soft landing of this sale, effectively reducing inflation without crashing the economy. Despite monetary tightening over the past year and a half, the economy has managed to maintain its resilience.      

Philippine Stocks  

Philippine Stocks rose as inflation eased.

• The Philippine Stock Exchange Index rose week on week as inflation eased in October, anticipating a no rate hike at BSP’s next policy meeting. 

• Investors remained positive with the latest inflation print where it eased to 4.9% in October versus 6.1% in September and was lower than the 5.7% median estimate.

• The Philippine economy grew faster than expected in the third quarter, thanks to a boost from state spending that’s put the nation back on track to post Southeast Asia’s quickest expansion this year. 
• Gross domestic product in the three months through September rose 5.9% from a year earlier as released by the Philippine Statistics Authority.

Philippine Bonds

Philippine Bond yields moved lower.

• October headline inflation fell to 4.9% in October from 6.1% in September. This is below Bloomberg’s median forecast of 5.6% (SBC: 5.4%) and BSP’s forecast range of 5.1%-5.9%. Major contributor to the sharp disinflation was the slowdown in food and transport inflation.

• The moderation in inflation and the strengthening of the peso provide the Bangko Sentral ng Pilipinas (BSP) with the option to maintain current interest rates in the upcoming November 16 meeting. However, we retain our FY23F inflation average at 6.1%, noting risks of supply shocks and demand-pull inflation in the holiday season.

• Monetary Policy Stance: We now see a pause from the central bank given the lower inflation trajectory. The BSP is likely to adopt a cautious stance, possibly pausing rate hikes in the near term due to the recent moderation in inflation. However, the central bank will remain on alert for signs of persistent inflationary pressures, which may necessitate a resumption of rate increases.

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/2023/11/07/feds-goolsbee-says-golden-path-of-a-huge-drop-in-inflation-without-a-recession-is-still-possible.html (2) https://www.cnbc.com/2023/10/26/us-gdp-grew-at-a-4point9percent-annual-pace-in-the-third-quarter-better-than-expected.html (3) https://www.bworldonline.com/stock-market/2023/11/07/556127/index-rises-to-6100-level-as-inflation-eases-in-oct/ (4) https://www.bworldonline.com/stock-market/2023/11/08/556434/stocks-track-wall-street-rally-before-gdp-report/ (5) https://www.bworldonline.com/economy/2023/11/08/556465/initial-q2-gdp-estimate-left-unrevised-at-4-3/ 

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.