The Philippines needs to expand by more than 6% in the next three quarters to meet the government’s target.

The Experts

Easing inflation outlook continues to lift markets

Global stocks moved higher with increasing certainty of rate cuts in the second half of the year .

FWD Investment Team

Global and Philippine Market Update

May 9 to May 15, 2024


Global Markets

Global Stocks moved higher with increasing certainty of rate cuts in the second half of the year .

  • US inflation eased slightly in April, registering a year-on-year rate of 3.4%, offering some relief to consumers. This is the first month where inflation was not higher than anticipated. Shelter and energy costs were the primary drivers of inflation. The Federal Reserve (Fed) has been challenged by persistent inflation and is expected to wait through the summer for improved data, with the first cut potentially occurring in September.
  • The UK economy has emerged from recession, with gross domestic product (GDP) rising by 0.6% in the first quarter. The UK had entered a shallow recession in the second half of 2023 due to persistent inflationary pressures. However, inflation continues to be a major issue, and the Bank of England has warned that it remains elevated, leading the central bank to maintain its main interest rate at 5.25%.
  • US retail sales were flat in April, defying analysts’ expectations for continued growth, indicating that consumer spending is slowing down. This trend is expected to continue into the second quarter due to high interest rates and a weakening job market. Despite softer data, consumer spending is strong enough to support economic growth. 


Philippine Stocks

Philippine Stocks struggled to move higher amid low trading volume.

  • Philippine stocks continue to search for a new catalyst as they trade sideways. Investors remain cautious ahead of the central bank’s policy meeting, which is expected to provide guidance on inflation and interest rates. Despite the recent global rally, the Philippine market has not been significantly impacted, likely requiring more clarity on the path of prices and growth before gaining momentum.
  • The Philippines needs to expand by more than 6% in the next three quarters to meet the government’s target. National Economic and Development Authority (NEDA) Secretary Arsenio M. Baliscan noted that household spending has been restrained by higher cost of goods and the El Niño-induced dry weather. Consumers are also grappling with higher levels of debt while savings have yet to recover from pre-pandemic levels. Public construction has been a major factor in the economy, which has witnessed double digit growth, but private construction has been left behind, increasing by single digits.


Philippine Bonds

Philippine Bond yields remained elevated over concerns about persistent inflation.

  • The Bureau of Treasury (BTr) partially awarded a reissued treasury bond with a remaining life of 14 years and eight months at an average rate of 6.95%. This rate was higher than similar bonds quoted in the secondary market. Investors have lowered their expectations of rate cuts this year due to persistent inflation. They anticipate only two cuts from the initial six cuts at the beginning of the year.
  • The weakness of the Philippine Peso could potentially drive inflation higher, but the Bangko Sentral ng Pilipinas (BSP) does not need to intervene unless the peso experiences a sharp depreciation. BSP Governor Eli M. Remolona Jr. stated that the central bank has only intervened in “small amounts” to maintain market stability. The exchange rate is approaching the Php 58-level, a threshold last seen 18 months ago. Inflation accelerated for a third straight month to 3.8% in April but still within the 2 to 4% inflation target. 



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) (6) (7)

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.