The week ahead

> PH:  Today is the deadline for Metro Global Holdings [MGH suspended] to comply with the PSE’s minimum public ownership threshold. If MGH fails to raise its public float above 10% (EDGE says it’s at 8.67% as of this writing), then the PSE said that it will be “automatically delisted.” Tomorrow (Tuesday) we’ll hear from the Philippine Statistics Authority (PSA) about the Consumer Price Index data it collected for July, and we’ll get the inflation rate that it will calculate based on that data. Then, on Thursday, the PSA will be back at it again with its report on our Q2 Gross Domestic Product data, which will give policymakers a better idea of the health of our economy.

> International:  Aside from watching how the US markets deal with Friday’s flash-crash and weak jobs report, I’ll be paying particular attention to the US Initial Jobless Claims report that will come out on Thursday (Friday morning our time). 

MB BOTTOM-LINE: The high-level context to what is happening in the US is that a recent employment/jobs report showed an unexpected level of weakness, prompting investors to consider the increased possibility that the US economy could be heading into a recession. A recession is at least two consecutive quarters of negative GDP growth. The US Federal Reserve’s argument across the entirety of this inflation battle has been that a “soft landing” is possible where the “higher for longer” interest rates used by the Fed to combat inflation are carefully calculated so as to bring inflation back down into the target band while also not triggering a recession. Interest rates suppress economic activity purposefully to reduce demand inflation, but suppress that activity too much and you get negative economic growth and a period where businesses pull back on hiring and spending. Did the Fed wait too long to pivot? That’s the open question, and that’s what will be percolating in the background as we get our critical economic data from the PSA this week ahead of the BSP’s meeting to make its own decision on our interest rate late next week. 
 

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