Global and Philippine Market Update

June 5 to June 11, 2025

Global Markets

Global Stocks extended gains as the market closely monitored US-China trade talks.

• US stocks extended their winning streak as the market closely watched US-China trade talks in London. The rally pushed the S&P 500 and Nasdaq to their highest levels since February, just shy of their all-time highs fueled by optimism that Washington may ease tariff and semiconductor export restrictions in exchange for improved access to rare earth minerals.
  
  
• After two days of intense high-level talks in London, senior trade officials from the United States and China announced they had reached a preliminary framework agreement aimed at implementing the consensus reached in previous Geneva negotiations. The framework intends to ease longstanding trade tensions by addressing key issues such as export restrictions on critical materials—including rare earth minerals—and recalibrating contentious tariff policies that have fueled an escalating trade war. While the agreement now awaits final approval from President Trump and Chinese leadership, both sides expressed cautious optimism that this development could pave the way toward stabilizing their economic relations and reducing global market uncertainties, even as further detailed negotiations are anticipated to finalize outstanding matters.
  
  
• Expectations for Fed rate cuts have diminished significantly as a stronger-than-expected May labor-market report, showing U.S. employers added 139,000 jobs and unemployment holding steady at 4.2%, prompted markets to revise their forecasts. The likelihood of rate reductions in June or July dropped sharply, with investors now pricing in an 83% chance that rates will remain unchanged during both meetings. Fed officials have echoed this cautious stance, citing persistent inflationary pressures and uncertainty stemming from tariffs as justification to maintain restrictive monetary policy through the summer. Despite vocal pressure from President Trump for more aggressive easing, the Fed has resisted, noting that such moves are typically reserved for downturns. Market consensus now leans toward a single potential rate cut later in the year, possibly in December, pending further economic developments.

Philippine Stocks

Philippine Stocks  declined amid heightened investor caution.

• Philippine stocks extended their decline dropping below 6,400 amid caution over ongoing US–China trade talks and expectations of a potential rate cut by the BSP. The PSEi declined as investors pulled back due to uncertainties surrounding the dialogue and fresh market leads. Sector indices—including financials, property, mining and oil, services, holding firms, and industrials—closed lower, highlighting widespread trepidation regarding the shifting tariff announcements and global supply chain disruptions linked to US–China tensions. Despite a positive spin from US President Trump and scheduled meetings involving top US officials with their Chinese counterparts to ease trade frictions, market participants remain wary about the impact of ongoing negotiations on future market stability and global economic growth.
  
  
• FDI net inflows into the Philippines fell to a three-month low of $498 million in March 2025, a 27.8% drop from the $689 million recorded in March 2024. In the first quarter, FDI plunged 41.1% to $1.76 billion, down from $2.99 billion year on year, driven by a 35.3% fall in debt investments and a 66.7% plunge in equity capital. Major equity contributors included Singapore, Japan, the US, South Korea, and Malaysia, funding sectors like real estate, manufacturing, finance, insurance, and administrative services. Analysts attribute the downturn to external pressures, such as geopolitical tensions, high interest rates, and U.S. tariff threats, and internal factors, including election-year policy uncertainty, regulatory inconsistency, and slow structural reforms. Despite these headwinds, authorities remain hopeful that the full implementation of the CREATE MORE tax incentive law, coupled with anticipated BSP rate cuts, will help restore investor confidence.

Philippine Bonds

Philippine Bond yields traded sideways as market awaits next set of catalysts.

• Yields on short-term government bills eased in response to cooler inflation data, bolstering market expectations of a potential rate cut by BSP in its next meeting. The BTr upscaled its issuance from P25 billion to P28.6 billion amid strong investor demand, with total bids reaching P98.3 billion—almost four times the original offer. Average yields edged down slightly for all tenors as some investors locked in the current relatively high yields in anticipation of further declines if monetary easing continues.
  
  
• Philippine inflation eased to 1.3% year on year, the lowest rate since November 2019 and down slightly from April's 1.4% according to the Philippine Statistics Authority. This moderated inflation was driven by a gentler rise in utility costs, including slower increases in electricity and water bills, along with lower transport expenses thanks to a stronger peso. These factors kept the inflation reading well within the BSP’s forecast range of 0.9% to 1.7% and below its target band of 2% to 4%, while the average inflation for the first five months of the year remained at 1.9%. This trend supports the potential for further interest rate cuts aimed at reducing borrowing costs for consumers amid a cautious economic environment.
  
  
• Analysts are increasingly confident that the BSP will implement further rate cuts amid an environment of below-target inflation and sluggish economic growth as conditions have become favorable for easing monetary policy. Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. noted that a stronger peso and stable price pressures add momentum to the case for an additional 25 basis point cut at the upcoming June meeting, with prospects for further reductions later in the year if inflation continues to remain subdued. This benign inflation outlook is supported by factors such as low crude oil prices, a negative output gap, and persistent government measures to keep rice prices in check, even as weak first-quarter GDP growth underscores the need for monetary accommodation.

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.bworldonline.com/top-stories/2025/06/11/678404/fdi-net-inflows-slump-to-3-month-low/?amp (2) https://www.bworldonline.com/stock-market/2025/06/10/678259/phl-shares-go-down-as-us-china-talks-continue/ (3) https://edition.cnn.com/2025/06/10/business/us-china-trade-talks-london-agreement-intl-hnk (4) https://www.bworldonline.com/top-stories/2025/06/09/677828/below-target-inflation-supports-case-for-another-rate-cut-analysts-say/ (4) https://business.inquirer.net/529439/may-inflation-at-1-3-lowest-in-nearly-6-years (5) https://business.inquirer.net/529775/t-bill-yields-down-on-rate-cut-hopes-slowing-inflation (6) https://www.investopedia.com/dow-jones-today-06102025-11751328

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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