Global and Philippine Market Update

Jan. 9 to Jan. 15, 2025

Global Markets

Global Stocks closed higher, driven by strong jobs data that sustained the market's upward trend.

• The U.S. job market exceeded expectations, with firms adding over 250,000 jobs in the final month of Joe Biden's presidency. This strong performance has left Federal Reserve policymakers uncertain about the need for further interest rate cuts. Additionally, a University of Michigan survey revealed that consumers now expect prices to rise by 3.3% over the next year, a significant increase from previous months. Persistent inflation and uncertainty regarding President-elect Donald Trump's economic policies—including tariffs, tax cuts, and immigration limits—have already led the Fed to consider slower rate cuts. Last month, many central bankers began anticipating faster growth and higher inflation due to Trump's plans.

• Asian markets continued their global rally as lower-than-expected US inflation brought relief to investors and renewed hopes for interest rate cuts this year. However, caution persists with Donald Trump set to return to the White House next week, as his promises to increase tariffs on imports and cut taxes and regulations raise concerns about potential inflation resurgence.

Philippine Stocks

Philippine Stocks fell due to inflationary concerns and the impact of smaller rate cuts.

• The main index dropped to the 6,300-level due to strong US labor data, which heightened inflation concerns in the world's largest economy and led markets to reconsider their expectations for Federal Reserve rate cuts. According to Japhet Louis O. Tantiangco, Senior Research Analyst at Philstocks Financial, Inc., the local market declined as it factored in the rising inflation expectations in the US and the possibility of the Federal Reserve slowing down its policy easing. This follows the release of robust US labor market data for December 2024. 

• Moody's Ratings has projected that the economy's growth will slow to 6.1% in 2025, down from an expected 6.2% last year. In their outlook, Moody's described the 6.1% forecast as "above-trend." The government's official growth targets are 6-6.5% for 2024 and 6-8% for 2025. Rising employment and higher remittance inflows are expected to support household spending. Additionally, public investment will bolster growth, while reforms such as market liberalization and increased foreign investment will drive private-sector investment.

Philippine Bonds

Philippine Bond yields rose higher in line with US treasuries.

• The government successfully awarded the full amount of a reissued 10-year Treasury bond at average yield of 6.249%. Total bids reached P54.219 billion, nearly double the P30 billion amount on offer, bringing the total outstanding volume for the series to P293.6 billion. T-bond rates increased, reflecting the rise in US Treasury yields following stronger-than-expected US labor data and concerns over President-elect Donald J. Trump's potential protectionist policies, which have heightened inflation worries in the US. 

• The Philippines’ December inflation rate accelerated to 2.9%, as reported by the Philippine Statistics Authority (PSA). This brought the average inflation rate for 2024 to 3.2%, which is within the government's target range of 2% to 4%. December marked the third consecutive month of rising inflation, following October's 2.3% and November's 2.5%. Despite this upward trend, the full-year figure for 2024 was significantly lower than the 6% average recorded in 2023. The PSA attributed the quickening inflation rate in December to rising prices in housing, utilities, and fuel, with notable increases in liquefied petroleum gas (7.8%), rentals (2.4%), and electricity (1.6%).

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.reuters.com/markets/us/fed-seen-cutting-policy-rate-just-once-2025-job-growth-surges-2025-01-10/ (2) https://business.inquirer.net/501535/asian-stocks-follow-wall-st-higher-on-welcome-us-inflation-data (3) https://business.inquirer.net/501498/stock-markets-get-boost-from-bank-earnings-inflation-data  (4) https://www.bworldonline.com/economy/2025/01/15/646993/moodys-sees-phl-2025-growth-slowing-to-6-1/ (5) https://www.bworldonline.com/banking-finance/2025/01/15/646608/govt-fully-awards-reissued-10-year-treasury-bonds-at-higher-rates/ (6) https://www.rappler.com/business/inflation-rate-philippines-december-2024/

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.