Major US stock indexes ended solidly in positive territory on Wednesday (12/07/23), led by a gain of more than 1% in the Nasdaq after a report showed inflation subsided further, resulting the June CPI registering their slowest pace for 2 years or since March 2021. On a monthly basis, US CPI (June) rose 0.2% after growing 0.1% in May, but running at 3% YoY on an annual basis, lower than May’s 4%. The data underscored expectations the Federal Reserve may let interest rate stand after one more 25 bps hike expected at its July FOMC Meeting. However, what remains to be considered is the position of Core CPI (June), which is still at 4.8% YoY (although managed to cool down from May at 5.3%); but still twice as high as the Federal Reserve’s 2% target. This will certainly still be a matter of debate going forward regarding the Fed’s continued tight monetary policy. Another sentiment that moved the market was the S&P 500 banks index, which crept up 0.6%; where traders are looking forward to the release of performance reports from major banks, such as JPMorgan Chase on Friday which will kick off the 2Q23 earnings season. Investors also digesting US Treasury Secretary Janet Yellen’s trip to China, which raised Beijing’s hopes that tariffs on imported Chinese goods could be reduced. Later tonight the US will again take the attention of the market, where the weekly Initial Jobless Claims and PPI (June) data will again be in the spotlight. On the other hand, the Dollar dropped to its lowest point in over a year and US Treasuries plummeted on the back of the release of US Inflation data that has cooled. The Dollar Index dropped to 100.54, the lowest since April 2022, and was last down 1% at 100.55, on track for its biggest daily percentage loss since early February. From the world’s east, South Korea reported Unemployment Rate (June) growing at 2.6% (vs 2.5% on May). This morning they also reported the Export & Import Price Index (June) which dropped further below estimates. Later today South Korea’s central bank will make a decision on interest rates which are expected to remain flat at 3.5%. Meanwhile, Japan reported Core Machine Orders (May) which fell sharply unexpectedly on both an annual and monthly basis. Not surprisingly, their PPI (June) figure also failed to meet expectations, and there was still deflation on a monthly basis of 0.2% MoM (Following -0.7% in May). Indonesia also reported significantly weaker Retail Sales (May) which grew by minus 4.5% YoY, compared to April’s positive 1.5%. The aura of economic slowdown seems to be getting more noticeable on the Asian continent. The highlight will be China’s Export & Imports figures (June) where exports are expected to start increasing to 0.5% YoY, while imports are predicted to slow even further at -6.1% YoY. Overall, the data will conclude China’s Trade Balance which is expected to increase its coffers to USD93.9 billion, growing from the previous month at USD65.81 billion. Meanwhile, from Europe, the UK will report GDP (May) where monthly growth is expected to be at minus 0.4% compared to 0.2% in April. The negative growth situation has also been predicted to haunt the UK Industrial & Manufacturing Production in May which is reported later this afternoon, along with Trade Balance (May). French CPI (June) follows later where they hope to tame Inflation to 4.5% YoY from 5.1% in May. Speaking of commodities, US oil inventories this time turned out to be still far above the forecast, potentially putting pressure on Crude Oil prices which are now crawling up to USD75.83 / barrel, but this possibility seems to have been covered by the sentiment of the previously announced production cuts by OPEC +.

Considering the sentiments rolling in the market, NHKSI RESEARCH expects the JCI bullish tone to be able to continue as more clarity on the US Inflation situation & interest rate trend going forward is released. Investors/traders are encouraged to take advantage of this positive sentiment to achieve optimal profit by increasing their buying position in the market; following yesterday’s Foreign Net Buy which was recorded at IDR545.23 billion.

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