Today’s Outlook:

• Wall Street ended sharply lower and the US Treasury yield surged on Friday following a mixed US Payroll report, weak consumer data sentiment, and renewed trade war concerns. All three major US stock indexes ended in negative territory in a sell-off that deepened after reports that US President Donald Trump will soon announce new tariffs. All indexes recorded losses last week. The Dow Jones Industrial Average fell 444.23 points, or 0.99%, to 44,303.40, the S&P 500 lost 0.95%, and the Nasdaq Composite plunged 1.36%. Meanwhile, the MSCI global stock index fell 6.14 points, or 0.70%, to 869.20.

• MARKET SENTIMENT: The highly anticipated employment report showed the US added 143,000 jobs in January, 53.4% fewer than the upwardly revised 307,000 in December. The report, which was distorted by annual benchmark revisions, along with California wildfires and unusually cold weather, also showed hotter-than expected hourly wage growth, as well as a surprise drop in the unemployment rate, to 4.0% from 4.1%. Unfortunately, a separate report from the respected University of Michigan showed consumer sentiment had deteriorated unexpectedly this month as inflation expectations surged.

• – The major indices extended losses after US President Donald Trump said he would announce a new round of reciprocal tariffs on many countries next week. He plans to announce additional tariffs of 25% on all steel and aluminum imports into the US on Monday, and will also announce reciprocal duties on what he sees as unfair trade practices, on Tuesday or Wednesday; both duties will be effective immediately. Trump’s tariff threat comes days after a 10% import duty on China went into effect, to which Beijing has retaliated with a series of measures and duties. Trump has also threatened 25% duties on Canada and Mexico in favor of stricter border controls, though has postponed the duties on assurances from both countries. Note that Canada, Brazil, Mexico, South Korea and Vietnam are the largest steel exporters to the US. Canada is also by far the largest exporter of aluminum to the US. Trump in his first term imposed a 25% import duty on steel and a 10% import duty on aluminum, but later granted duty-free quotas to allies such as Canada, Mexico and Brazil. As for reciprocal tariffs, the US President has consistently criticized the unequal import duties imposed by other countries on US goods. He has long criticized the EU’s 10% tariff on US auto imports, which is much higher than the 2.5% import duty imposed by the US.

• – EARNINGS SEASON: Amazon reported disappointing growth in its cloud computing segment and lower-than-expected first-quarter profit and revenue. Similar disappointments from Microsoft and Alphabet earlier in the week fueled suspicions that large-cap tech stocks and tech-related stocks are losing momentum, especially following the sell-off caused by the sentiment of the emergence of Chinese AI model DeepSeek.

• EUROPEAN & ASIAN MARKETS: European stocks followed the decline in US stocks as investors grew jittery over the possibility of an escalating trade war, while a dire profit warning forecast from Porsche further dampened risk appetite. The STOXX 600 index fell 0.38%, while the FTSEurofirst 300 Europe index fell 0.39%. Emerging market stocks rose 0.37%. MSCI’s index of Asia Pacific shares outside Japan closed higher by 0.39%, while Japan’s Nikkei fell 0.72%, to 38,787.02. Market sentiment in Europe was also to some extent influenced by economic indicators that Industrial Production in GERMANY in Dec plunged severely below expectations.

• – JAPAN reported a very significant increase in household spending in Dec, which seems to be in line with the wage increases that have taken place there.

• FIXED INCOME & CURRENCY: US TREASURY YIELD rose on an upward revision to the Dec US Nonfarm Payroll additions; as well as a surprise drop in the unemployment rate, despite the disappointing headline payroll number. The 10-year US benchmark bond yield rose 4.7 basis points to 4.485%, from 4.438% on Thursday afternoon. The 30-year US Treasury yield rose 3.9 basis points to 4.6856% from 4.647% on Thursday afternoon. The yield on the 2-year note, which typically moves in line with Federal Reserve interest rate expectations, rose 7.7 basis points to 4.285%, from 4.208% on Thursday afternoon.

• – The US DOLLAR rallied in volatile trading after the US payrolls report, which seemed to support the US Federal Reserve’s rationale for delaying interest rate cuts for the time being. The DOLLAR INDEX (DXY), which measures the greenback’s strength against a basket of currencies including the Yen and Euro, rose 0.36% to 108.05, with the EURO down 0.51% at $1.0328. The Japanese YEN strengthened 0.12% against the US dollar to 151.27/USD. The POUNDSTERLING weakened 0.24% to $1.2404. The Mexican peso weakened 0.28% against the USD to 20.529. The Canadian dollar strengthened 0.23% against the USD to C$1.43 per US dollar.

• – In cryptocurrencies, BITCOIN fell 0.86% to $95,986.52. Ethereum fell 3.73% to $2,607.61.

• COMMODITIES: OIL prices rose after new sanctions were imposed on Iranian crude exports, but remained on track for a third consecutive weekly decline on tariff concerns. US WTI crude rose 0.55% to $71.00 per barrel, while BRENT closed at $74.66 per barrel, up 0.50% on the day.

• – GOLD extended its gains as resurfacing trade concerns added to the safe haven metal’s luster. Spot gold prices rose 0.13% to $2,860.18 per ounce. US gold futures rose 0.26% to $2,863.50 per ounce.

• INDONESIA: reported Jan Foreign Exchange Reserves at USD 156.10 billion, slightly higher than the previous month’s USD 155.7 billion. Today market participants will monitor the Motor Sales figure (Jan) which has been trending consistently lower since 1.5 years.

• – JCI reached the Support of June 2024 low around 6700, as well as the lower channel Support of the downtrend channel pattern formed since last Sept. Although it plunged 133 pts or closed almost minus 2% to 6742.58, the last candle was in the shape of a long-leg Hammer which indicates a potential technical rebound is in sight. However, considering the regional market sentiment and Trump’s latest tariff announcement regarding the imposition of 25% import duty on steel & aluminum products, NHKSI RESEARCH considers that the hope of limited downside potential for today will still be tested. Although there have been many stocks in their bottom positions but given its high speculation status, investors/traders are advised to maintain more of a Wait & See attitude for a while.

Company News

• MEDC: Medco Energy Announces New Cash from Ijen’s Geothermal
• TINS: PT Timah Targets Net Profit of Up to Rp1.5 Trillion in 2025
• PALM: PALM’s IDR612.2 Billion Bond Issuance Schedule

Domestic & Global News
Pursuing 5.2% Economic Growth Target, Government Needs to Boost Manufacturing Performance
Trump to Impose 25% Import Tariffs on Steel and Aluminum

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