The Dow Jones closed with a downside of 0.7%/221 points on Thursday (11/05/23), driven by a dive in Disney and ongoing turmoil in regional banks after PacWest Bancorp reported that deposits fell 9.5% last week. However, the Nasdaq was rescued by Alphabet’s AI product update. Tech stocks were also supported by government bond yields, which continued to slide down as predictions that the Fed will soon stop the upward trend of US interest rates as data emerged that Inflation managed to flatten and jobless claims rose. The US PPI (Apr.) rose 0.2% MoM, lower than the 0.3% economists had expected, and slowed to 3.2% YoY from 3.4% in the previous month. Weekly Initial Jobless Claims increased by 22k to 264k for the week ended May 6, the highest claims in 1.5 years. This pattern of jobless claims suggests growth¬† in labor wages and a slowdown in labor demand.

From Asia, China reported Inflation (Apr.) which is still slipping further now at 0.1% YoY (from 0.7% previous month), and even deflation on month basis -0.1% (vs 0.0% forecast). Their producer-level inflation or PPI also dropped more than expected at minus 3.6%, a worse deflation than both forecast and previous period. While from Europe, the Bank of England solidified their interest rate upward trend with another 25bps hike, bringing the UK benchmark interest rate to 4.5%. Later in the day, 1Q23 GDP and Manufacturing Production (Mar.) figures from the UK will be monitored.

The looming recession threat in the US along with China’s weak economy has created a rather gloomy market sentiment that impacted the Indonesian capital market on Thursday, sending the JCI plummeting 55.97points / -0.82% to 6755.95 level; the most definitive drop in over a month. It seems that this Closing position further casts doubt that the short term uptrend of JCI can be sustained as it never managed to put JCI back above the Moving Average Resistance; or above 6830- 6850 to be safe. Therefore, at the end of this week NHKSI RESEARCH still recommends to maintain a Wait & See stance, and be prepared if further position reduction is needed.

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