Today’s Outlook:

• The S&P 500 closed up at a record 5,420 points on Wednesday’s trading (12/06/24) on the back of the Fed’s prospects to cut interest rates based on newly surfaced US Inflation data showing goods & services prices fell lower than expected in May, thus fueling optimism that the disinflation trend remains intact. The NASDAQ Composite rallied 1.5% to its third consecutive record close, while the Dow Jones Industrial Average fell 35 points, or 0.1% lower. As for the latest US CPI, it showed a growth of 3.3% yoy, slipping 0.1% from April. On a monthly basis, the CPI reading slowed to a flat 0.0%, compared to 0.3% in the previous month. The Federal Reserve  held interest rates steady for the eighth consecutive time in Thursday’s FOMC Meeting decision, but now sees only 1 rate cut opportunity this year (compared to the previous estimate in March of 3 cuts), as inflation is expected to trend higher than previously expected. Fed officials now see the benchmark rate falling to 5.1% this year, and 4.1% in 2025, up from the previous forecast of 3.9%; before finally falling to 3.1% in 2026. This narrative could seem even more hawkish as the outlook for one rate cut this year actually does not have the support of the 4 central bank committee members who favor no rate cut this year. Signs that US central bank officials are also of the view that monetary policy will be tighter in the long run, they raised their forecast for CORE CPI, which is the Fed’s preferred inflation measure, to an estimated 2.8% in 2024, up from the previous forecast of 2.6%. For 2025, core inflation is forecast at 2.3%, up from 2.2% previously. The stiffer inflation outlook is not accompanied by expectations of stronger economic growth as central bank members did not change their gross domestic product, or GDP, forecast of 2.1% for this year and 2% for next year. Meanwhile, in the labor market, the unemployment rate is seen at 4% this year, unchanged from the previous estimate in March, but is now expected to rise to 4.2% next year, up 0.1% from the previous projection of 4.1%. In his press conference, Fed Chairman Jerome Powell acknowledged the inflation data had cooled off from expectations, but said the committee would continue to monitor economic data to determine future monetary policy. As such, he neither confirmed anything regarding a potential rate cut in September nor committed to any future pivot opportunities. Market participants took Powell’s statement on the Summary of Economic Projections or what is known as “dot plots” as a conservative move and still indicated that the opportunity for more than 1 rate cut this year is still open. Important ECONOMIC INDICATORS from the US tonight continue as usual: weekly Initial Jobless Claims and US PPI (May) data which will show whether producer-level inflation will heat up to 2.5% yoy as expected.
• ASIA & EUROPE MARKETS: Speaking of CPI, CHINA released its Inflation data (May) yesterday, which still showed signs of deflation as the growth of goods & services prices in May remained the same as the previous month at 0.3% yoy. On a monthly basis, the deflationary trend is more evident with -0.1% mom compared to 0.1% in April. Similarly, PPI (May) is still immersed in the deflationary figure of -1.4% yoy although slightly better than the projection of -1.5% and the previous month -2.5%. In continental EUROPE, the UK reported April GDP where economic growth appeared stagnant on a monthly basis. Of course, this was due to Industrial & Manufacturing Production (Apr) which weakened somewhat below expectations. GERMANY also released their May CPI figure which was in-line with forecasts at 2.4% yoy, meaning it heated up 0.2% from the previous month. Elsewhere, EUROPEAN CENTRAL BANK Vice President Luis de Guindos said the ECB should move “very slowly” in cutting interest rates, due to the high uncertainty on the inflation outlook.
• COMMODITIES: OIL prices ended higher on Wednesday, as a cooling US Inflation report supported rate cut hopes, but gains were held back by an unexpected surge in weekly domestic crude supplies and hawkish Federal Reserve projections in predicting chances of a rate cut this year. BRENT futures rose 0.8% to USD 82.60/barrel, while US WTI futures appreciated 0.7% to USD 78.50/barrel. Government inventory data showed crude oil inventories rose by 3.7 million barrels in the week ending June 7 (to total 459.7 million barrels), against expectations of a 1.2 million barrel decline. In addition to crude oil supplies, gasoline and refined oil stocks also rose by 2.6 million and 881,000 barrels respectively, casting doubt on hopes that fuel consumption in the US will be able to pick up as the summer road trip season kicks off. On the other hand, prices continued to rise even though the International Energy Agency (IEA) in its monthly report cut its forecast for global crude oil demand in 2024 by 100,000 barrels per day to 960,000 barrels per day, citing sluggish consumption in developed countries. The Paris-based agency also expects global oil demand to peak in 2029 and begin contracting the following year. This contrasts with a more optimistic forecast from the Organization of the Petroleum Exporting Countries (OPEC) on Tuesday, which maintained a strong global oil demand outlook in 2024. The organization said in its monthly report that their recent decision to maintain production curbs leaves a possible supply deficit in the third quarter. The OPEC+ decision has caused oil prices to consolidate 2% since last week. News related to MIDDLE EAST CONFLICT: Palestinian militant group Hamas has proposed many changes (some of which are unworkable) to the US-backed ceasefire proposal with Israel in Gaza, US Secretary of State Antony Blinken said on Wednesday in a joint press conference with the Qatari PM in Doha; adding that mediators are determined to find a compromise for both sides.
• JCI fell 5.59 points (-0.08%) to 6,850.10, topped by foreign net sell worth IDR 747 billion (all market), making their FOREIGN NET SELL position since the beginning of the year increased to IDR 10.79 trillion. The RUPIAH exchange rate still did not move to close at IDR 16240 / USD, after having touched a high of IDR 16315 / USD yesterday. Indonesia’s lack of marketability led Morgan Stanley to downgrade Indonesia’s stock rating to “underweight,” citing risks of uncertainty over the country’s fiscal policy and a strengthening dollar, exacerbated by the upward trend in US interest rates. The value of Motorcycle Sales in Indonesia plunged 4.5% in May, in stark contrast to the 18.3% positive growth in the previous month. NHKSI RESEARCH believes that although JCI seems to be maintaining the 6850 Support area but with regional market sentiment still somewhat limited, it still looks difficult for JCI to be able to climb higher than the psychological level of 7000 which will be the nearest Resistance. Therefore, WAIT & SEE attitude is again more suitable to be applied while waiting for more conducive market sentiment.

Company News

• CLEO: Issuer Owned by Hermanto Tanoko (CLEO) Establishes Ice Production Business
• PWON: Pakuwon Approves Dividend Distribution of IDR 433 Billion
• CMRY: Cimory Seeks Permission to Establish Spices and Flavoring Businesses

Domestic & Global News
DPR Asks Prabowo to Design a 5-year Direct Cigarette Excise Rate Increase
EU Officially Raises Import Tariffs on Chinese Electric Cars

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