Today’s Outlook:
• GLOBAL STOCK INDEXES were mostly down; the Dow Jones Industrial Average shed 0.42% and Treasury yields edged higher in Tuesday’s trading (09/01/24), with investors bracing for this week’s US CPI & PPI data and the start of the 4Q23 earnings season which kicks off on Friday. It is expected that headline inflation will rise 0.2% on a monthly basis and by 3.2% on an annualized basis. Meanwhile, ahead of the US earnings season, shares in several major US banks fell by around 1%. In terms of economic data, the US reported a Trade Balance deficit of USD 63.2 billion (lower than estimate & previous period), and recorded a deterioration on both the Export & Import transaction fronts.
• US INTEREST RATES: Investors are looking for clues on when the Federal Reserve will begin lowering interest rates. Expectations that the US central bank will start cutting interest rates as soon as March have declined, with the CME Group FedWatch Tool showing a 65.7% chance of a cut of at least 25 bps in the month, down from 79% last week. This certainly helped keep US Treasury yields back near the 4%, with the 10-year yield holding slightly higher at 4.019% after hitting a high of 4.053% earlier in the session.
• EUROPEAN MARKETS: The MSCI world equity index, which tracks stocks in 49 countries, dropped 0.23%, while European stocks ended down 0.2%. Euro area unemployment data released on Tuesday came in below expectations (actual: 6.4%, forecast: 6.5%). On the other hand, German Industrial Production (Nov) fell 0.7% mom, a decline well below expectations of a positive 0.2% growth, and an even worse reading than the previous month at minus 0.3%.
• ASIA MARKETS: South Korea’s unemployment rate rose to a near 2-year high in December. The unemployment rate in the country reached 3.3%, higher than 2.8% in November and the highest since January 2022, according to Statistics Korea. In 2023, South Korea’s annual unemployment rate reached 2.7%, down for the third consecutive year and the lowest since data release began in 2000. As for the neighboring country of the Ginseng Country, Japan announced that Household Spending dropped further in Nov; not surprisingly resulting in Inflation in the Tokyo area slipping further in Dec. Today China will release data on the level of new loans or New Loans which the amount is expected to increase to CNY 1400 billion, up from CNY 1090 billion in the previous period, so that it can show economic growth in the Bamboo Curtain Country.
• FIXED INCOME: US Treasury yields climbed slightly higher. The US Treasury sold $52 billion worth of three-year bonds, earning a high yield of 4.105%, lower than market estimates at the bid deadline, suggesting investors absorbed the bonds at no premium. In afternoon trading, the benchmark 10-year yield rose slightly to 4.017%.
• CURRENCY: The dollar rose 0.17% against the yen to 144.46. The euro was 0.2% weaker today at $1.0928, while the Dollar Index, which measures the greenback against a number of other major trading partners’ currencies, was up 0.2% at 102.51. The Dollar Index (DXY) hit a 5-month low in December, with investors betting that the Fed will cut interest rates sooner.
• COMMODITIES: OIL prices rose about 2% on Tuesday as the Middle East crisis and supply halts in Libya mitigated the previous day’s heavy losses. Brent crude oil futures closed $1.47, or 1.9%, higher at $77.59 a barrel, while US West Texas Intermediate (WTI) crude ended $1.47, or 2.1% up at $72.24. Oil prices received support from the closure of the 300,000 barrel per day (bpd) Sharara oil field in Libya, one of the largest oil fields in Libya, which is often the target of local and broader political protests, as well as continued tensions in the Middle East. Israel’s military has said its fight against Hamas will continue until 2024, fueling fears that the conflict could escalate into a regional crisis that disrupts oil supplies. Meanwhile, some major shipping companies are still avoiding the Red Sea following attacks by Iran-allied Houthi militants in response to Israel’s war against Hamas. However, according to Reuters analysis, the impact on oil tanker movements is not as great as expected. Oil futures also drew support on Tuesday after Saudi Arabia stressed its desire to support the efforts to stabilize the oil market and after reports that Russia curbed its crude production in December. Russia is part of the OPEC+ group of oil producers that has agreed to cut production by about 2.2 million barrels per day.
• In the US, crude oil production is expected to reach a new record high in the next two years but grow at a slower rate, as efficiency gains offset a decline in rig activity, according to the Energy Information Agency (EIA). Output will increase by 290,000 barrels per day to a record 13.21 million barrels per day this year. The latest report stated that weekly crude oil stocks fell by 5.2 million barrels in the week ending January 5 (again well above expectations of minus 1.2 million barrels) as quoted by the American Petroleum Institute.
• GOLD prices on the spot market stabilized at $2,028.95 per ounce.
• INDONESIA released Consumer Confidence (Dec) which rose slightly to 123.8, from 123.6 in November. Today will see the Retail Sales figure and compared to the last reading of 2.4% yoy. JCI finally broke its uptrend which has been showing symptoms of overbought/overheating from consistent RSI negative divergence, when JCI reached an all-time high in the 7400s. JCI this time has also broken MA20 Support (making 7224 the closest resistance now), and more likely to continue consolidation towards TARGET 7070-7060. NHKSI RESEARCH suggests to use the weakening momentum as an opportunity to BUY ON WEAKNESS.
Company News
• MIDI: Increase LWS Capital by IDR70 Billion
• BMTR: Acquires 3.12 Billion BABP Shares
• CGAS: Prepare IDR20 Billion CapEx
Domestic & Global News
• Prices Will Still Be High Despite Importing 3 Million Tons of Rice, Here’s Why
• US Trade Balance Deficit Narrows to USD 63.2 Billion, Led by Services Sector
Download full report HERE.
