Global and Philippine Market Update

Sept. 29 to Oct. 5, 2022

Global Markets 

Global Stocks recover after retreating the past few weeks.

• The Institute of Supply Management (ISM) released a report which shows growth of US service providers remaining firm. Business activity remains solid while prices trended lower. This suggests that demand for services remains healthy despite high inflation. On the manufacturing side, the ISM report showed a contraction in manufacturing employment. This can be taken as a positive given the Federal Reserve's (Fed) goal to lower demand. The economy is showing signs of cooling which may lead the Fed to slow down its rate hikes.

• The US Job Openings and Labor Turnover (JOLT) number showed that the ratio of job openings and unemployed persons dropped in August. It contracted to 1.67 jobs for every unemployed person, down from about 2 in July. The ultra-tight labor market is one of the primary drivers of inflation as it drives up wages. The lower ratio is a good sign that the Fed hikes are working, and inflation may begin to ease further.

• The Organization of the Petroleum Exporting Countries (OPEC) and its allies agreed to cut oil production to push prices higher despite calls from the US to pump more oil to help in global recovery. Production is planned to be reduced by 2 million barrels a day starting in November.

Philippine Stocks

Philippine Stocks moved higher as investors took advantage to add exposure to beaten down stocks. 

• Bargain hunting pushed the PSE index higher as investors made bets that global central banks will not lead the global economy into a deep recession. There is also hope that the local market will remain resilient with third quarter corporate earnings remaining positive.

• The S&P Global Philippines Purchasing Managers Index (PMI) rose to 52.9 in September from 51.2 in July. This is the eighth straight month of expansion. A measure above 50 denotes improvement. The growth is primarily driven by domestic demand as Filipinos return to the office and school.

Philippine Bonds

Philippine Bond Yields climbed by an average of 0.09% across the curve. Rates will likely remain elevated for the rest of the year.

• The Bureau of Treasury (BTr) partially awarded a re-issued 7-year treasury bond with a remaining life of 2 years and six months at an average rate of 5.746%. This is 0.45% higher than a similar bond in the secondary market. The partial award was due to the high rates demanded by investors.

• Inflation accelerated to 6.9% in September, its fastest pace in 13 years. The National Economic Development Authority (NEDA) stated that inflation was driven by robust domestic demand, high commodity prices, supply chain issues, weather disruptions and a strong US dollar.

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/us-manufacturing-activity-slowest-almost-2-12-years-september-ism-2022-10-03/ (2) https://www.bloomberg.com/news/articles/2022-10-05/us-services-growth-remains-at-solid-pace-price-pressures-ease (3) https://www.cnbc.com/2022/10/04/jolts-august-2022.html (4) https://www.cnbc.com/2022/10/05/oil-opec-imposes-deep-production-cuts-in-a-bid-to-shore-up-prices.html (5) https://www.bworldonline.com/stock-market/2022/10/04/478517/pse-index-surges-as-phl-factory-activity-improves/ (6) https://www.bworldonline.com/stock-market/2022/10/03/478192/shares-rebound-as-investors-pick-up-bargains-2/ (7) https://www.bworldonline.com/top-stories/2022/10/06/478892/inflation-zooms-to-6-9-in-sept/ (8) https://www.bworldonline.com/banking-finance/2022/10/05/478559/govt-makes-partial-award-of-reissued-t-bonds/

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.