Today’s Outlook:
• The S&P 500 and NASDAQ moved in positive territory, while Brent crude oil prices hit a 3.5-year low in Tuesday’s trading (10/09/24) amid fears of weakening global demand, a day before key US inflation data is released. Market participants are bracing for the CPI report from the US Department of Labor, as well as the first debate between Vice President Kamala Harris and former President Donald Trump, who are in a tight race for the White House. Data from China showing a surge in exports appears to be priced in anticipation of stricter tariffs from trading partners, including the new US administration. Technology megacaps and technology-related stocks helped drive the Nasdaq higher, while the S&P 500 posted more modest gains, but the blue-chip Dow Jones Industrial Average closed in the red. Major bank stocks were pressured after Federal Reserve Vice Chairman for Supervision, Michael Barr, announced major revisions to banks’ capital plans. The sector was further shaken after JPMorgan Chase issued an interest income warning, as interest rates are expected to fall. The Dow Jones Industrial Average lost 92.63 points, or 0.23%, to 40,736.96; the S&P 500 gained 0.45%, and the Nasdaq Composite gained 0.84%.
• MARKET SENTIMENT:
— Wednesday’s US CPI report is expected to show inflation approaching the Federal Reserve’s 2% target, the fourth consecutive month that Core CPI growth has slowed; thus reflecting Fed Chairman Jerome Powell’s belief that price growth is under control, and weakness in the labor market hints at the time for a rate cut. Financial markets are pricing in a 71% probability that the central bank will lower its target Fed funds rate by 25 basis points at the end of its monetary policy meeting next week, with a 31% probability of a larger rate cut of 50 basis points, according to the CME FedWatch survey.
— CITI analysts in their latest note revealed: The Fed may be preparing to cut interest rates by a deeper-than-expected amount to prop up the economy. Citi also expects Fed officials to significantly update their Summary of Economic Projections next week, in which the Unemployment Rate by the end of this year will be revised up and the path of policy rates revised down. Analysts expect the Fed to consider 100 basis points of cuts this year; compared to the “dot plot” in June which showed only one rate cut of 25 basis points, with the following strategy: first cut in Sept at 50bps, followed by 2x more rate cuts in Nov & Dec at 25bps each.
— The US CAPRES DEBATE is eagerly awaited by the public where currently Harris & Trump show a fairly balanced chance in the fight for the US presidency. The debate will begin at 9pm local time, with current electability polls slightly favoring a Trump victory.
• ASIA & EUROPE MARKETS: European stocks were lower, impacted by bank and energy stocks as investors took a cautious stance ahead of the release of US inflation data and a rate cut forecast from EUROPEAN CENTRAL BANK later in the week. The pan-European STOXX 600 index fell 0.54% and the MSCI global stock index rose 0.17%. Emerging market stocks fell 0.07%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed up 0.07%, while Japan’s Nikkei fell 0.16%. CHINA reported annualized Import growth plunged to just 0.5% in August, leading market participants to shrug off the good news that Exports grew at their fastest pace in 1.5 years. WHAT TO EXPECT TODAY: UK: GDP (Jul), Industrial & Manufacturing Production (Jul). CHINA: New Loans (Aug): forecast CNY 810 billion versus previous CNY 260 billion.
• FIXED INCOME & CURRENCIES: US bond yields fell ahead of the US presidential debate and Wednesday’s US CPI report. The benchmark US10YT bond price was last up 14/32 at a yield of 3.6479%, down from 3.699% at the end of Monday. The 30-year US Treasury note price was last up 20/32 at a yield of 3.9648%, down from 3.999% at the end of Monday. The US DOLLAR was last up slightly against a basket of world currencies; where the DXY last closed up 0.06%, and the EURO fell 0.07% to USD 1.1026. The JAPAN YEN strengthened 0.60% against the US Dollar at 142.33/USD, while the Pounds Sterling last traded at USD 1.3085, up 0.10%.
• COMMODITIES: OIL prices slumped considerably; BRENT fell below USD 70/barrel for the first time since December 2021 as lower demand projections from OPEC+ offset potential US supply concerns due to Tropical Storm Francine. As for US WTI, it plummeted 4.31% to USD 65.75/barrel, while BRENT settled at USD 69.19/barrel, a 3.69% drop; recording its lowest daily close since December 2021. Both are now down more than 25% compared to the same period last year, and US gasoline prices are 30% cheaper compared to last year. OPEC+ sees global oil demand rising by 2.03 million barrels per day (bpd) in 2024, this figure is down from the 2.11 million bpd forecast made the previous month; making the second consecutive month of downward revisions. Most of the decline came from China, where demand growth is now estimated at 650k bpd in 2024, down from the previous estimate of 700k bpd, as economic difficulties in the world’s second largest economy continue. In terms of other commodities, GOLD prices rose above the psychological USD 2,500 level as investors braced for the US CPI report. Spot Gold added 0.5% to USD 2,516.61/ounce.
• INDONESIA: JCI moved into the positive zone by advancing 58 points / +0.76% to a closing position of 7,761 supported by the Technology sector up 2.29%. RETAIL SALES data in Indonesia increased 4.5% yoy in July 2024, up from a 2.7% increase in the previous month. This was the third consecutive month of retail turnover growth and the fastest pace since March, supported by the government’s cash transfer program. Technically speaking, JCI may continue to climb along the Resistance ceiling of 7770 and reach NHKSI RESEARCH’s year-end target (in bullish scenario) of 7800. The advice to let your profits run while not forgetting to apply Trailing Stops can still be applied to investment strategies. Consistent foreign buying flows recorded a net buy of IDR 236.96bn yesterday on the RG market (accumulated IDR 2.30tn YTD). RUPIAH slipped slightly to 15445/USD, where USD in a small attempt to break the 15490-15500 Resistance which has the potential to strengthen it back towards 15670, depending on how DXY moves 1-2 today regarding the release of US Inflation data.
Company News
• BUKA: OJK Reprimands Bukalapak Regarding Realizing the Remaining IDR 9.8T IPO Funds
• RAAM: Private Placement of 619.42 Million Shares, RAAM Seeks Investor Approval Tomorrow
• BCAP: Hary Tanoe’s Issuer, MNC Kapital Affirms Not Involved in Vista Outdoor Acquisition
Domestic & Global News
Sugar-Sweetened Beverage Excise Tariff of 2.5%, Sri Mulyani’s Subordinate Says It’s Still a Proposal
About a Quarter of US Gulf of Mexico Oil and Gas Output Shut Due to Francine
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