Global and Philippine Market Update

June 12 to June 18, 2025

Global Markets

Global Stocks declined as the Israel-Iran conflict heightened market uncertainty.

• Global equity markets experienced significant volatility during the week as investors closely monitored escalating tensions between Israel and Iran. The decline in equities was driven by fears that the conflict could widen, particularly amid discussions of a potential U.S. strike on Iranian nuclear facilities by President Trump. Meanwhile, oil prices surged on concerns over supply disruptions in the Middle East, and gold rallied as investors increasingly turned to traditional safe-haven assets in response to mounting global uncertainty.
  
  
• The FED held the federal funds rate steady at 4.25–4.50%, adopting a cautious “wait and see” stance amid persistent tariff-related economic uncertainty despite ongoing political pressure from President Trump to cut rates. Powell stressed that escalating tariffs, most recently the “Liberation Day” levies, are likely to increase inflation, though current data still show inflation near the Fed’s ~2% target and labor market conditions remain solid. Forward guidance now projects two quarter-point rate reductions by year-end, with additional cuts anticipated in 2026–2027, contingent upon how inflation and growth evolve. The Fed declined to bow to political influence, emphasizing its independence and data-driven decision-making. This deliberate policy stance maintains stability but signals that any easing will depend on future economic signals and tariff developments.
  
  
• Escalating military strikes between Israel and Iran have prompted President Trump to consider deploying U.S. airstrikes against Iran's nuclear facilities. National security briefings have been held on the matter, although no formal approval has been granted. The President has called for Iran's unconditional surrender while maintaining that it is not too late to negotiate a diplomatic agreement on its nuclear program. According to U.S. intelligence, Iran has already mobilized missiles and necessary equipment for potential strikes on U.S. bases in the region should American forces join Israel's military efforts. Tehran has warned that any U.S. intervention would further destabilize the region and risk triggering an all-out war. 

Philippine Stocks

Philippine Stocks  declined amid heightened investor caution.

• The PSEi declined for the week to close at 6,337.43, as rising geopolitical tensions between Israel and Iran triggered investor caution. Foreign investors turned net sellers, offloading P2.31 billion in shares amid thinning market participation ahead of the BSP and U.S. Fed’s policy decisions. Analysts noted the PSEi’s failure to stay above the 6,400 point support level signals sustained market weakness, with the Israel – Iran conflict entering its fifth day and lingering uncertainty ahead of central bank cues. Sector-wise, industrials saw modest gains, while financials suffered most, reflecting risk-off sentiment.
  
  
• Nomura Global Markets projected that the current 10% baseline U.S. tariff on Philippine exports is likely to remain unchanged as the 90-day tariff pause expires in July. The forecast, which also expects similar rates for Singapore and reduced tariffs for Vietnam (24%) and Thailand (20%), comes following the Liberation Day tariff surge initiated on April 2 . The analysis aligns with ongoing trade negotiations, including talks involving Trade Secretary Maria Cristina Roque, U.S. Trade Representative Jamieson Greer, and Ambassador José Manuel Romualdez, addressing electronics, coconut, and garment sectors. Nomura emphasized that while Southeast Asia’s average tariffs may settle at around 15.5%, the absence of signs of export rerouting of China to the Philippines to avoid duties supports the persistence of the 10% level on Philippine goods. This suggests limited short-term relief for affected exporters, maintaining trade uncertainty ahead of post pause policy adjustments. 

Philippine Bonds

Philippine Bond yields were mixed amid Middle East conflict.

• The BTr partially awarded its reissued 10-year Treasury bonds amid heightened market volatility driven by global geopolitical concerns. It raised P27.603 billion, falling short of its P30-billion target despite total bids reaching nearly twice the auction size. Accepted bid yields ranged from 6.375% to 6.45%, with the average yield capped at 6.428%. This figure marked an increase over the previous auction’s yield of 6.226%, reflecting investors’ demand for higher returns. The upward adjustment in yields was attributed to heightened Middle East geopolitical tensions, which elevated oil prices and stoked inflation expectations, as well as the BSPs’ pending policy interest rate cu.
  
  
• The BTr successfully raised P26.7 billion at its latest Treasury bill auction, exceeding the initial P25 billion target thanks to nearly triple the demand—while yields showed a mixed profile amid Middle East conflict concerns. The 91-day bill, with tenders reaching P19.4 billion, was partially awarded at an average yield of 5.459%, up slightly from the previous auction. The 182-day tenor pulled in P11.2 billion, above its P8 billion target—with a modest yield drop to 5.523% while the 364 day issue was fully subscribed at ₱9 billion, yielding 5.657%. Secondary market BVAL rates before the auction were close: 5.4404%, 5.57%, and 5.6916% for the 91-, 182-, and 364-day tenors, respectively. Analysts attributed the mostly stable yields to investor caution due to rising oil prices and a weaker peso triggered by the Middle East conflict, which could stoke inflation and influence the BSP ahead of its upcoming policy meeting.
  
  
• The BSP has cut its key interest rate by 25 basis points, bringing the policy rate down to 5.25%. This move reflects a more optimistic inflation outlook, with the BSP now forecasting inflation at just 1.6% for 2025, well below its 2.0–4.0% target range. 

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://abcnews.go.com/Business/fed-expected-hold-interest-rates-steady-defying-trump/story?id=122923521, (2) https://www.investopedia.com/dow-jones-today-06182025-11756849 (3) https://www.bworldonline.com/stock-market/2025/06/18/680004/phl-shares-retreat-before-bsp-policy-meeting/ (4) PSEi retreats as geopolitical tensions mount, foreign funds resume selling - Malaya Business Insight (5) https://www.cbsnews.com/news/iran-israel-war-us-trump-nuclear-sites-risk-all-out-war/ (6) https://www.bworldonline.com/banking-finance/2025/06/17/679496/t-bill-rates-end-mixed-amid-mideast-conflict/ (7) https://www.bworldonline.com/banking-finance/2025/06/18/679788/govt-partially-awards-reissued-10-year-bonds-at-higher-yields (8) https://www.manilatimes.net/2025/06/20/business/top-business/bsp-keeps-easing-more-cuts-possible/2136557

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.

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