Inflation seems easing but remains elevated

Global and Philippine Market Update
April 4 to April 12, 2023

Global Markets

Global Stocks were flat after the shortened work week due to the long Easter holiday.

• Stocks showed little momentum in either direction this week after notching sizable gains last week. Investors remain optimistic that recent strains in the banking sector won’t lead to a full-blown crisis and on signs that the Federal Reserve (Fed) may be nearly done raising interest rates. But worries remain on the economic outlook with recent data providing some cause for concern. 

• Jobless claims data provided the latest evidence that the labor market might finally be easing. Claims totaled 228,000 last week, down from the 246,000 a week ago.

• Inflation rose just 0.1% in March and 5% from a year ago as Fed rate hikes took hold. The data showed that while inflation is still above where the Fed feels comfortable, it is at least showing continuing signs of decelerating. Policymakers target inflation around 2% as a healthy and sustainable growth level. The headline annual increase for the CPI was the smallest since June 2021.

Philippine Stocks

Philippine Stocks closed lower week on week amid muted trading before the Holy Week break.

• Philippine financial markets were closed from April 6-10 in observance of Holy Week and to commemorate the Day of Valor. This week, investors may continue to stay on the sidelines ahead of key data releases and with the market’s focus shifting to the next meetings of the Bangko Sentral ng Pilipinas (BSP) and US Federal Reserve.

• FDI net inflows declined by 45.7% to $448 million in January from $824 million in the same month last year, data from the BSP which was the lowest monthly inflow since the $426 million recorded in May 2021. 

• Fitch Solutions said that it maintained its 5.9% growth forecast in 2023 for the Philippines with inflation cooling though interest rates remain elevated. It also forecasted the current account deficit to narrow to 4.1% of GDP by the end of this year from 4.7% in 2022, on the back of lower commodity prices and resilient remittances.

Philippine Bonds

Philippine Bond Yield declined by 5bps from last week.

• March inflation was the weakest reading since the 6.9% posted in September. It remained much higher than last year’s 4%.

• Fitch Solutions expects the central bank to raise benchmark interest rates by another 25 basis points (bps) at its May 18 meeting, before keeping the policy rate on pause at 6.5% thereafter. However, the BSP could hike rates beyond 6.5% if inflation remains elevated and if the peso remains vulnerable.

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.wsj.com/articles/global-stocks-markets-dow-update-04-06-2023-625f10f (2) https://www.cnbc.com/2023/04/12/cpi-march-2023-.html (3) https://www.bworldonline.com/stock-market/2023/04/09/515533/phl-stocks-drop-amid-shortened-trading-week/ (4) https://www.bworldonline.com/stock-market/2023/04/10/515692/shares-to-move-sideways-as-market-waits-for-leads/ (5) https://www.bworldonline.com/economy/2023/04/12/516343/fitch-solutions-maintains-5-9-phl-growth-forecast/

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.