Today’s Outlook:
• The S&P 500 and NASDAQ posted their largest daily percentage gains since February 22; the DJIA crept up on the last trading day of July as chipmaker stocks rallied on sentiment of the Federal Reserve keeping US interest rates unchanged while hinting at possible easing in September if Inflation eases. Seven of the 11 S&P 500 sectors advanced, led by the Technology and Consumer discretionary sectors. The Philadelphia SE Semiconductor index rocketed up almost 7%. The Fed kept its benchmark overnight interest rate in a range of 5.25%-5.50% as it ended its 2-day FOMC Meeting, but left the door open for easing in September, exactly 7 weeks before the US Election in November. The 10-year US benchmark bond yield fell 9.8 bps to 4.043%. The Dow Jones Industrial Average rose 0.24% to 40,842.79, the S&P 500 jumped 1.58% to 5,522.30 and the NASDAQ Composite shot up 2.64% to 17,599.40. For the month of July, the S&P 500 gained 1.1%, the Dow surged 4.4%, while the Nasdaq fell 0.8%. Sector rotation is clearly shifting away from Technology and shifting to other laggard sectors. US President Joe Biden’s administration plans to unveil new rules next month that will expand US authority to stop exports of semiconductor manufacturing equipment from some foreign countries to chip makers in China, according to Reuters sources.
• ECONOMIC INDICATORS: At his press conference, Fed Chairman Jerome Powell said policymakers discussed the reasons for the rate cut, but a large majority agreed that now is not the right time; and the market assessed these central bank officials as more prepared for a rate cut in September. US ADP Nonfarm Employment Change data released before the Fed’s decision moment showed that the number of new jobs in the US private sector in July grew by less than expected (actual: 122k versus forecast 147k), suggesting the labor market is starting to loosen, especially when compared to the previous month’s figure of 155k. On the property front, Pending Home Sales grew a very strong 4.8% mom in June, much higher than the 1.4% forecast and more so than the 1.9% contraction in the previous month. Today it’s the weekly Initial Jobless Claims and the Manufacturing PMI (Jul) and Construction Spending (Jun) figures that will be in the spotlight for market participants.
• ASIA & EUROPE MARKETS: BANK OF JAPAN kicked off this week’s central bank parade on Wednesday, after they unexpectedly raised the benchmark interest rate 15bps to 0.25% and set a multi-stage reduction in monthly bond purchases to around 3 trillion Yen, half of the current target of 6 trillion Yen, to be implemented by early 2026. This plan indicates the end of quantitative easing aka massive monetary stimulus that has been running for a decade. The JAPAN interest rate hike comes amid improving Japanese inflation over the past 2 months, mainly due to improved consumer spending driven by higher wages. This trend further strengthens the central bank’s forecast that Inflation will rise to the 2% annual target on a sustainable basis, and therefore monetary conditions should start tightening. This morning Japan has released the au Jibun Bank Japan Manufacturing PMI (Jul) which slipped into contractionary territory, in line with the INDONESIA Nikkei Manufacturing PMI for July falling to 49.3, compared to June’s 50.7. Weakening PMIs also occurred in neighboring SOUTH KOREA & CHINA although they still remained in expansionary territory. From EUROPE, GERMANY reported Unemployment Rate (Jul) still unchanged at 6.0%, after yesterday’s release of Inflation which is still on an upward trend while economic growth is falling. EUROZONE inflation will still stutter towards the ECB’s 2% target as preliminary estimate of CPI (Jul) came in at 2.6% yoy, 0.1% higher than forecast and previous month’s 2.5%. Speaking of Inflation, today of course INDONESIA investors will monitor July Inflation which is expected to cool to 2.4% yoy, from 2.51% in the previous month. Monitoring of Manufacturing PMI figures will also occur in the European region in the countries of: GERMANY, EUROZONE, UK. BANK OF ENGLAND is highlighted later this afternoon for their interest rate decision which is likely to be reduced by 25bps to 5.0%; all these sentiments will move the overall European market.
• COMMODITIES: OIL prices rose sharply on Wednesday on the back of escalating tensions in the MIDDLE EAST and a record larger drop in US crude inventory stocks. BRENT futures jumped 3.7% to USD 80.92/barrel and US WTI rocketed 4.4% to USD 78.00/barrel, up from nearly 2-month lows. Ismail Haniyeh, the leader of the Palestinian military group Hamas, was killed in a missile attack in Tehran. The assassination is believed to be Israel’s retaliation for Hezbollah’s deadly attack on the Israeli-occupied Golan Heights; potentially a major setback for the chances of a ceasefire agreement on the 10-month-old war. On the other hand, the US Energy Information Agency reported on Wednesday that US crude oil inventories fell by nearly 3.4 million barrels in the week ended July 26, more than the expected 1.6 million barrel drop. The figure marks the 5th consecutive week of drop in US crude oil inventories, due to high demand for fuel in the travel-heavy summer season.
• JCI may capitalize on the positive sentiment of regional markets, as fuel to break the Resistance of the two Moving Averages and return to the 7300 level again, especially since foreigners booked a significant Net Buy yesterday of IDR 2.12 trillion (all markets). Conversely, if Support should break below 7250 then NHKSI RESEARCH advises investors/traders to reduce positions again.
Company News
• JPFA: Japfa’s Net Profit Soared 1, 704% to IDR 1.47 Trillion in the First Half of 2020
• BRPT: Barito Pacific Earns Net Profit of USD 34 Million in the First Half of 2024
• INDF: 30% Drop, Indofood’s June 2024 Profit Remains IDR 3.85 Trillion
Domestic & Global News
S&P Maintains Indonesia’s Credit Rating at BBB with Stable Outlook
China Signals Economic Shrinkage, Manufacturing Activity Continues to Slow Three Months in a Row
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