Overseas news
US Treasury yields plunged, with the 2-year yield 0.20% lower at 4.87%, as applications for US unemployment benefits last week rose more than expected. This led traders to slightly reduce their expectations for an outsized increase in the key rate by the US Federal Reserve (the Fed).
When unemployment is up, an economy is seen to be weakening, and the reverse when unemployment is down. Rising unemployment rates can cause central banks to cut interest rates in order to encourage economic growth and activity.
The US dollar, which rose to a near 3-month high during Fed Chair Jerome Powell Powell’s testimony, weakened against a basket of currencies after the jobless claims data. US stocks slid as markets reduced their highly optimistic viewpoint ahead of tonight’s much awaited US nonfarm payrolls (NFP) report.
The NFP measures the number of workers in the US aside from those in farms and private households, and proprietors, non-profit employees, and active military. It gives a good picture of the general job situation in that country.
Local developments
The Philippines’ unemployment rate rose to 4.8% in January from 4.3% in December 2022, the highest level since September last year. This was due to higher year-on-year unemployment in construction, and the loss of temporary jobs during the holidays.
The decrease in the number of jobs could be a side effect of the current key rate levels, as companies may be reducing their costs while borrowing money is expensive. However, this may be a necessary risk as the Bangko Sentral ng Pilipinas (BSP) tries to tame inflation.
The Philippines’ factory output, as measured by the volume of production index (VoPI), rose for the 8th straight month in January. A 10.6% year-on-year increase, this happened as 17 out of 22 industry divisions recorded growth in VoPI, led by the manufacture of food products.
VoPI measures the change in the monthly production volume of manufacturing as compared to a reference period and base year. It can hint at the manufacturing industry’s overall health, and indirectly reflects consumer demand.
The National Economic and Development Authority (NEDA) Board approved 194 flagship infrastructure projects worth P9 trillion, as well as the amendments to joint venture (JV) guidelines.
Infrastructure spending may have positive effects on the economy both directly (through the increase in jobs and spending power of workers) and indirectly (by promoting growth in industries and locations affected by the developments).
As there aren’t any big changes in today’s news, many investors may adopt a wait-and-see approach to their decisions. If you choose to do this too, you can stay cautious but optimistic.
