Today’s Outlook:

• Global stocks retreated from their all-time highs on Friday’s trading (08/06/24) after US monthly employment data aka NONFARM PAYROLLS surprisingly came in stronger, thereby dimming hopes that the Federal Reserve will soon follow suit in cutting interest rates EUROZONE & CANADA; causing US Treasury yields to surge higher. The world’s largest economy added 272,000 jobs last month, beating economists’ predictions of 185,000 jobs and shattering investors’ consensus that the job market had weakened enough to push Inflation rates lower. While this is a plus for the economy and corporate earnings, the report could have a negative impact in terms of prospects for interest rate cuts this year. As such, the MSCI world stock index fell 0.3%, after touching a record high of 797.48 points. Wall Street also ended in the red; the S&P 500 edged down 0.1% after hitting an all-time high of 5,375.08 points, the Dow Jones Industrial Average dropped 0.2%, and the NASDAQ also lost 0.2%. The CBOE Volatility Index, which measures the volatility of the S&P 500, plunged 2.86% to 12.22.
• FIXED INCOME: The benchmark 10-year US Treasury yield, which is the benchmark for borrowing rates globally, jumped more than 15 basis points after the Nonfarm Payrolls data was released, to 4.4335%; the biggest daily jump in 2 months. While the 2-year yield, which best reflects interest rate expectations, rose nearly 17 basis points to 4.8868%, following 6 consecutive days of declines until Thursday. Bond yields rise as prices fall.
• Market participants expect the Fed to start lowering interest rates from their 23-year high of 5.25-5.5% in November. Meanwhile, the odds of a Fed rate cut of 25 basis points in September fell to 56%, from about 70% on Thursday, according to LSEG’s Fedwatch. The September forecast had been steadier the previous day, especially after the European Central Bank (ECB) made a decision to cut its deposit rate from a record 4% to 3.75% on Thursday. The Bank of Canada on Wednesday became the first G7 country to cut its key policy rate, following cuts by Sweden’s Riksbank and the Swiss National Bank. Following the employment report, EUROZONE interest rate forecasts also saw an adjustment, with investors now expecting 55 bps of rate cuts in the region this year, down from 58 bps before the data was released. As a result, a sell-off was also detected in the European Stoxx 600 stock index (which has gained almost 10% this year) as they lost 0.2%. EUROZONE Bond prices were also sluggish on Friday, with the German 10-year Bund yield rising 8 bps to 2.618%. On the other hand, the US DOLLAR instantly gained 0.8% against a number of currencies after the labor data was released.
• COMMODITIES: BRENT futures fell 0.6% to USD 79.36/barrel. Dollar strength weighed on spot GOLD prices, which slid 3.6% to USD 2,290.59/ounce.
• ASIA MARKETS: market participants were actually focused on important data from JAPAN: 1Q GDP which turned out to be still immersed in recession territory with growth of -1.8% yoy, slightly better than last period’s -2.0%. Unfortunately, the quarterly economic growth also turned out to be as bad as expected, minus 0.5% compared to the slight positive 0.1% that was at least possible in the previous quarter.
• INDONESIA: May Consumer Confidence Index data will be announced, although it is unclear if it will be stronger than April’s 127.7 reading. It is still quite tough for JCI to maintain the psychological level of 7000 as last week JCI plunged 1.72%, hit by consistent foreign fund outflow in bond & stock market. Despite the detection of LIMITED DOWNSIDE POTENTIAL to the first Support line around 6870, NHKSI RESEARCH is not too sure about the technical rebound indication and therefore better advise Indonesian capital market investors/traders to prioritize WAIT & SEE.

Company News

• BELI: Seek Approval for Private Placement of 9.4 Billion Shares
• ACES: Ace Hardware Disburses IDR 572 Billion Dividend
• HRUM: Harum Energy Shareholders Fail to Receive Dividends

Domestic & Global News
Investors are Hesitant to Invest in Indonesia’s Textile Industry, Here’s Why
China’s Property Still Stumbling, India’s Steel Industry Projected to Surge

Download full report HERE.