Today’s Outlook:
• MSCI’s global equity indexes edged lower in Wednesday trading while the US Dollar strengthened and Oil prices pared earlier gains, as investors digested US economic data and anxiously awaited Israel’s response to Iran’s missile attack a day earlier. US President Joe Biden said he would not support an Israeli strike on Iran’s nuclear sites and urged Israel to act “proportionally” in response to Iran’s largest direct attack on Israel, though the US also said there would be “severe consequences” for Tehran’s actions. Iran, after firing a ballistic missile into Israel on Tuesday, said on Wednesday morning that its attack was over unless there were further provocations. Israeli Prime Minister Benjamin Netanyahu vowed to retaliate against Tehran’s airstrikes, saying in a statement that Iran “made a big mistake” and “will pay for it.” Wall Street’s three major indices managed to close in positive territory, the Dow Jones Industrial Average gained 39.55 points, or 0.09%, to 42,196.52; both the S&P 500 and NASDAQ edged up by 0.01% and 0.08% respectively. The MSCI global stock index fell 0.38 points, or 0.04%, to 845.49. Earlier the STOXX Europe 600 index closed up 0.05% at 521.14.
• ECONOMIC INDICATORS:
– ADP NONFARM EMPLOYMENT CHANGE, noted US private payrolls increased by 143,000 in September, surpassing predictions of 124,000 and Aug’s figure of 103,000, signaling underlying strength in the economy. Richmond Fed President Barkin said on Wednesday that the Fed’s policy outlook for the rest of 2024 is a 50 basis point cut. With only two meetings left this year, the odds continue to favor a 25bps rate cut at the November FOMC Meeting, according to Investing.com’s FFR survey.
– Later tonight at around 1930 GMT will be the weekly INITIAL JOBLESS CLAIMS data, followed by the S&P Global Composite PMI (Sept) which concentrates more on the Services sector where it is expected to remain fairly resilient at 55.4. ISM Non-Manufacturing PMI data will also follow and hopefully show the US Services sector is still solidly in expansionary territory. EUROPE & ASIA MARKETS: EUROZONE recorded Unemployment Rate (Aug) still unchanged at 6.4%, as expected still the same as the previous month. While China & South Korea markets are enjoying National Day holiday, JAPAN this morning has released Services PMI data from au Jibun Bank Japan which is stable in expansionary territory although it looks a little weaker. Next up, European countries will release their Composite & Services PMI, respectively: GERMANY, EUROZONE, UK with the average predicted to contract.
• COMMODITIES: OIL prices rose on fears further escalation in the MIDDLE EAST CONFLICT could threaten oil supplies from the region, which is the world’s top oil producer, but price gains were capped by a large increase in US crude inventories. An alleged strike by 45,000 dockworkers that halted shipments at US East Coast and Gulf Coast ports entered a second day on Wednesday with no negotiations currently scheduled between the two sides, Reuters sources said. In the energy market, US WTI closed up 0.39% at USD 70.10/barrel and BRENT ended the session at USD 73.90/barrel, up 0.46%. In terms of precious metals, spot GOLD fell 0.14% to USD 2,659.22/ounce.
• CURRENCY & FIXED INCOME: The US DOLLAR hit a 3-week high against the Euro after the ADP EMPLOYMENT CHANGE national employment report showed employment in the US private sector increased more than expected in September, and this data was released ahead of the highly anticipated NONFARM PAYROLL on Friday. Yields on longer-dated US government bonds rose after the data showed the labor market stabilized while investors monitored conflicts in the Middle East. Looking at the private payroll data, the bond market may not be able to expect a 50bps rate cut at the next FOMC Meeting. The 10-year US TREASURY yield rose 4 basis points to 3.783%, from 3.743% on Tuesday afternoon, while the 30-year US Treasury yield rose 4.9 basis points to 4.1299%. The yield on the 2-year note, which usually moves in line with interest rate expectations, rose 1.4 basis points to 3.6352%, from 3.621% on Tuesday afternoon. From the currency watch, the DOLLAR INDEX (DXY), which measures the greenback’s strength against a basket of currencies including the Yen and Euro, rose 0.34% to 101.60. The Euro was down 0.16% at USD 1.1049 while the Dollar gained 2% against the Japanese Yen to 146.43.
• WHERE TO GO FROM HERE:
– GOLDMAN SACHS suggests that their 6000 level target for the S&P 500 may actually be “too low”, signaling a more bullish sentiment for the US equity market. They predict a strong rally starting on October 28, despite the current short-term market turbulence. Goldman Sachs warns of a potential increase in volatility over the next 3 weeks, predicting that the market will react strongly to daily sentiment. Analysts noted a significant decline in the gamma of the S&P 500 index, which has fallen by USD 14 billion, the largest shift in its data set. This suggests that the market has more freedom to move, and according to Goldman Sachs, it could lead to further declines in the short term.
– On the flip side, ahead of Q3 earnings season, STRATEGAS revised the S&P 500 earnings growth for Q3 2024 lower, now only 3.2%; with Energy being the weakest sector, and Technology still being the strongest.
• JCI was able to maintain the crucial Support of 7500 (Low: 7501.46), despite depreciating 78.87pts / -1.03% to Closing point of 7563.26 on Wednesday trading. JCI suffered an onslaught of foreign selling amounting to IDR 683.80bn (RG market), shrinking the YTD Foreign Net Buy position to just IDR 1.13 trillion. RUPIAH is struggling to hold below 15300/USD although it is a bit difficult to contain further potential weakness, possibly moving towards 15575 soon if USD/IDR continues to be steady above MA20 / 15280 Resistance. NHKSI RESEARCH expects market volatility to remain quite high over the next few days, especially as the consistent foreign short positions have led them to further reduce their positions in bluechips/index mover stocks, eventually dragging the overall index down.
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