Money and insurance

Lack of major catalysts keeps markets rangebound

Global stocks moved lower as central banks indicate monetary policy may remain tight.

Global and Philippine Market Update
June 22 to June 28, 2023

Global Markets

Global Stocks moved lower as central banks indicate monetary policy may remain tight. 

  • Federal Reserve (Fed) Chairman Jerome Powell took a firm stance on inflation, expressing his expectations of multiple rate hikes in the future, possibly at an aggressive pace. He emphasized that a strong labor market may require further tightening measures. While he acknowledged the possibility of a downturn, he maintained that it is not the most likely scenario. However, most economists believe that the current pace of rate increases will eventually pull the US into a shallow recession.
  • Business activity in Europe decelerated in June, as indicated by the drop in the euro zone’s Purchasing Managers’ Index (PMI) from 52.8 in April to 50.3. A reading above 50 signifies an expansion, while a reading below 50 indicates a contraction. The data reveals that business output neared stagnation, pointing to renewed weakness in the economy. While concerns regarding energy and supply chain disruptions have eased, there is now an escalating worry about demand growth. The impact of higher interest rates and the increasing cost of living are starting to have adverse effects on the economy.

Philippine Stocks

Philippine Stocks edged higher on bargain hunting.

  • Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla expressed his belief that the Philippines achieved a 6% expansion during the second quarter and is poised to end the full year above 6%. National Economic Development Authority (NEDA) Undersecretary Rosemarie G. Edillon projected that the Philippine economy will outperform many regional counterparts despite external challenges. She anticipates strong growth, improved employment figures and easing inflation for the country. However, she acknowledges the importance of maintaining a high level of investment to sustain economic growth. The government has so far identified Php17.3 trillion investment requirement for infrastructure development.
  • The government’s budget deficit in May narrowed by Php122.2 billion as revenue surpassed spending. This improvement can be attributed to an increase in revenue resulting from stronger economic activity, while expenditures only saw a slight rise. While a smaller budget deficit is beneficial for the government’s fiscal position, it may have a negative impact on growth if infrastructure projects face delays. Finance Secretary Diokno expressed concerns regarding underutilization of funds by government agencies.

Philippine Bonds

Philippine Bond yields continued to rise in line with the climb in US interest rates.

  • The Bureau of Treasury (BTr) fully awarded a reissued 10-year treasury bond with a remaining life of nine years and two months at an average rate of 6.243%. This was higher than below 6% yields seen from similar tenors the previous month. Most major central banks have indicated further rate hikes which pushed yields higher.
  • BSP Governor Felipe Medalla faces challenges in reducing policy rates due to the potential risks associated with the Fed’s monetary tightening. Although the central bank forecast inflation to ease below 4% by October or November, there are still economic uncertainties. The foreign exchange market is sensitive to the interest rate differential between the Philippines and the US, and lowering the rate while the Fed increases them could potentially weaken the peso.


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) (2) (3) (4) (5)

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.