Today’s Outlook:
• BYE FEBRUARY, WELCOME MARCH! The NASDAQ led the US stock market gains for the umpteenth time, even closing at a record high since 2021, on the back of a rally in AI-related companies, following an in-line with expectations US Inflation report and comments from several Federal Reserve officials supporting hopes of a rate cut materializing this summer. The NASDAQ and S&P500 both posted their best monthly performance since November, with the SP&P500 rallying 5.17%, the NASDAQ jumping 6.12%, and the DJIA up 2.22%; the fourth consecutive month of gains. The Russell 2000 Small Cap index also appreciated by 5.45% for the month of February.
• ECONOMIC DATA: PCE price index was released as expected, where it rose 0.3% mom and 2.4% yoy for January, which is the lowest annual increase since Feb 2021 following a 2.6% increase in December, thus easing investors’ concerns that the level of inflation that is difficult to fall will make the Fed keep interest rates high for a longer time. In addition, the weekly Initial Jobless Claims report recorded an increase of 13,000 jobless claims in the week ending Feb 17 (actual total: 215,000), above economists’ predictions of an increase of 8,000 (forecast: 210,000). Tonight the wave of economic indicators will continue with important reports: Manufacturing PMI (Feb) from S&P500 and ISM, Construction Spending (Jan), as well as important views from the University of Michigan on Inflation & consumer expectations about the business climate in the next 6 months.
• OTHER MARKET SENTIMENTS: In response to all the data, US Treasury yields fell moderately but remained underpinned by Personal Income data which includes salaries, property income, plus other benefits, which increased 1% in Jan and therefore will keep consumer spending power solid. Two Fed officials were also quoted in one voice that they are quite optimistic that a rate cut can be realized this year, although they did not mention a specific time around the summer months. As is known, market participants have calculated the biggest chance of the pivot materializing is in June, as reported by the CME FedWatch Tool. Elsewhere, the US House of Representatives made progress in their efforts to avoid a shutdown of President Joe Biden’s administration, by supporting a request to extend government funding for 1 week, to be passed by the highest leadership council.
• ASIA MARKETS: Japan reported BoJ Core CPI which stabilized at 2.6% yoy in Feb, higher than the expected 2.3%, but supported by Construction Orders which strengthened drastically to 9.1% in Jan, compared to 0.4% in the previous month; an economic growth figure that was responded positively by the market, as it offset the preliminary estimate of Industrial Production which depreciated heavily to minus 7.5% in Jan, compared to 1.4% in the previous month. This morning Japan announced the Unemployment Rate (Jan) which remained unchanged at 2.4%. Later today, the au Jibun Bank Japan Manufacturing PMI (Feb) data is expected to move further up towards the expansionary limit. Meanwhile, neighboring Ginseng Country, South Korea published a Trade Balance surplus figure far above the forecast, helped by the plummeting Import figures, the percentage decline was greater than Export growth. What is more of a highlight today from the Asian continent is the announcement of the Chinese Composite PMI (Feb) which looks like China still has to pin more hopes on the Services sector to keep the PMI above the 50 level.
• EUROPEAN MARKETS: Continental Europe did not want to be outdone by rolling out a number of economic indicators since yesterday, mostly coming from Germany: Retail Sales (Jan) still contracted although the pace of decline has begun to be contained, but not so with their Unemployment Rate which was forced to grow 0.1% to 5.9% in Feb. Several German Inflation indicators expected February’s CPI position to be relatively softer than the previous month, thus spawning a preliminary estimate of German CPI (Feb) at 2.5% yoy, clearly sloping from the previous month at 2.9%. Furthermore, today there will still be a series of economic indicators to feed investors, such as Manufacturing PMI (Feb) for Germany and the Eurozone as well as the UK, while the Eurozone will release a preliminary estimate of Inflation (Feb) where annual growth is expected to be restrained at 2.5% yoy, compared to 2.8% in Jan. This afternoon will also see the Eurozone Unemployment Rate which is likely to remain around Jan’s 6.4%.
• COMMODITIES: OIL prices closed marginally lower on the last day of February, but recorded 2 consecutive months of gains, supported by tighter supply as well as hopes of a US interest rate cut materializing in the summer as Inflation data showed a downward trend. US WTI futures fell 0.4% to USD 78.26/barrel, while the Brent contract dropped 0.3% to USD 81.88/barrel. Expectations are also coming from OPEC+ to extend their production cuts in the second quarter, amid expectations from the public to maintain these production restrictions even until the end of 2024. OPEC+ is scheduled to meet in early March to decide on this, after having decided in November to hold voluntary production cuts of 2.2 million barrels/day in the first quarter of 2024. This expectation of oil production curbs coincides with US output figures that are at their record levels, at around 13.315 million barrels/day as recorded in December, as quoted from Energy Information Administration (EIA) data. On the other hand, concerns about sluggish global demand, especially from China, will still keep demand from the world’s number one oil importer stagnant. Meanwhile, the prolonged conflict in the Middle East still shows no sign of ending, where neither Israel nor Hamas seem to support the prospect of a ceasefire over their war in Gaza.
• INDONESIA: Market players’ attention today will of course be centered on the Inflation figure (Feb) which is forecast to be relatively flat at 2.6% yoy, from 2.57% in Jan. Core Inflation is also expected to be unchanged from 1.68% in Jan, to 1.71% for Feb. JCI’s closing position yesterday was somewhat maintained around the MA10 after intraday trading weakened back to around 7290. NHKSI RESEARCH assumes the mid-term uptrend is still intact as JCI is still moving above the support level of the PARALLEL CHANNEL pattern formed since last November’s bottom. It is still possible for JCI to continue strengthening at the end of this week towards TARGET 7380-7400 all-time-high, however, investors/traders should limit positioning near the resistance area, which is prone to profit-taking.
Company News
• AVIA: 2023 Profit Up 17.3%
• ISAT: Partnering with Cisco to Present the Latest Security Edge Services
• PMMP: Private Placement of 258.83 Million Sheets
Domestic & Global News
• Indonesia Needs 2.5 Million Active Dairy Cows to Run Free Milk Program
• Car Production Falls, Japan’s January 2024 Manufacturing Output Plunges 7.5%
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