Today’s Outlook:

• Stock markets jumped and bond yields fell in Tuesday’s trading (13/08/24) after data showed US PPI rose below forecast in July, reinforcing market expectations that cooling inflation will allow the Federal Reserve to cut interest rates soon. The producer-level price index rose 0.1% last month after rising 0.2% in June, the Labor Department’s Bureau of Labor Statistics said on Tuesday. Economists polled by Reuters had expected PPI to rise 0.2%. On an annualized basis, US PPI came in at 2.2% yoy, also lower than the 2.3% estimate and the previous month’s climb to 2.7%. Expectations that an interest rate cut is imminent supported Wall Street’s gains. The S&P 500 jumped 1.7%, the Dow Jones Industrial Average rose 1%, and the Nasdaq Composite gained 2.4%. MSCI’s index of global stocks appreciated 1.5%. In line with speculation of monetary policy easing, Treasury yields fell. The benchmark 10-year US TREASURY YIELD fell to 3.8484%, while the 2-year US Treasury yield fell to 3.9398%. In a week full of important economic indicators, later in the evening US consumer price index data for July will be released and is expected to show inflation rising to 0.2% on a monthly basis. Retail Sales data is scheduled to follow on Thursday. This week’s data could sharpen views on the next move from the Federal Reserve, while at the same time testing market strength. The market is currently evenly split between a 25 bps or 50 bps cut at the FOMC Meeting in September. Traders expect a total of 100 bps rate cut this year.

• ASIA & EUROPE MARKETS: Europe’s STOXX 600 index rose 0.5%, while Japan’s NIKKEI surged more than 3% after a holiday on Monday; these market moves were a welcome relief after last week’s wild volatility which started with a sell-off triggered by the rising Yen and US recession fears. The market is positive that this market turmoil is due more to the closing of Yen carry-trade positions, rather than any underlying concerns about global economic growth. EURO ZONE bond yields were little changed with the 10-year German bond yield, the Eurozone benchmark, falling to 2.188% last week, almost to its lowest level since January at 2.074%. Speaking of PPI, JAPAN was ahead of the game yesterday by releasing inflation growth at the producer level in line with expectations at 3.0% yoy in July. The UK announced a very loose labor market where the astonishing number of unemployed people in July was 135,000, almost 10x higher than the forecast of 14,500 and the previous period’s 36,200. This fact has not been reflected in the Wage Growth and Unemployment Rate data in June, the latest data still shows Wages grew 5.4% (above expectation 4.6%) and Unemployment Rate 4.2% (lower than expected 4.5%). The sluggish UK employment data is in line with the GERMAN & EUROZONE ZEW Economic Sentiment (Aug) where current economic conditions and sentiment around it looks pessimistic even quite significantly to below-expected levels. The weak economic movement was also reflected by CHINA’S New Loan figures in July, which only reached 20% of the amount expected to be realized, and was the lowest number of New Loans in 16 years. This afternoon EUROPEAN investors will be closely monitoring EUROZONE’s preliminary 2Q GDP estimate which is forecast to strengthen 0.2% to 0.6% yoy.

• CURRENCY: The YEN strengthened against the USD at 146.77/USD, after hitting a 7-month high of 141.675 on Monday last week, well off the 38-year lows of 161.96 recorded in early July. The Bank of Japan’s interest rate hike last month following intervention from Tokyo in early July saw many investors liquidate carry trade positions, where they borrow market money at low interest rates to fund higher return investments. The latest weekly data through August 6 showed that leveraged funds – typically hedge funds and various types of money managers – closed out their positions in the yen at the fastest pace since March 2011. The DOLLAR INDEX, which measures the strength of the US currency versus six other major currencies, fell 0.49% to 102.58. The EURO rose 0.6% to USD 1.09968, while the POUNDSTERLING gained 0.8% to USD 1.28670.

• COMMODITIES: BRENT futures fell 1.9% to USD 80.78/barrel, while US WTI futures lost 2% to USD 78.46/barrel. Brent has gained more than 3% on Monday, while US WTI has gained more than 4%. Oil prices depreciated on the back of OPEC’s move to cut its forecast for demand growth in 2024, while at the same time easing concerns about the risk of supply disruptions caused by the widening conflict in the Middle East. In terms of other commodities, GOLD which is starting to test critical resistance at prices above USD 2500/ounce seems hesitant to hold this high, especially since the price of this commodity will be heavily influenced by US Inflation figures that will appear soon. However, the increasingly feasible Sept rate cut projection does provide support for Gold prices with projections towards the USD 2700/ounce Target.

• JCI at 7356.64 is the highest Closing position in 5 months, supported by IDR 484.13 billion foreign fund inflow yesterday (all market) and IDR strengthening at 15830/USD currently. Unfortunately the RSI indicator is showing a negative divergence, warning investors/traders if this strengthening is not accompanied by equally strong buying momentum. NHKSI RESEARCH believes that US Inflation data will play a major role in determining the direction of the JCI going forward, therefore investors/traders are advised to closely monitor where the market sentiment goes, while imposing Trailing Stop levels when necessary.

Company News
• WIIM: Drop 40 Percent, Wismilak (WIIM) Recorded IDR 147M Profit in the First Semester
• ITMG: Indo Tambangraya Megah Posted USD129 Million Net Profit Equivalent to IDR 2.11 Trillion in 1H24
• PTRO: Prajogo Pangestu’s Issuer Secures IDR 17.4 T Mining Service Contracts

Domestic & Global News
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