The S&P 500 and Nasdaq reached their highest closes in 52 weeks on Tuesday (13/06/23) after US Inflation data (May) slipped to the lowest level in a year, boosting bets that the Federal Reserve will not raise interest rates later tonight (around 1 AM GMT on Thursday). The US Labor Department report showed the consumer price index (CPI) rose 0.1% mom in May, compared to 0.4% in April (an 11-month consecutive decline); while Core Inflation unchanged at 0.4% mom. On an annual basis, Inflation rose 4% yoy, successfully lower than the previous period at 4.9%. Thus, traders priced in the probability that the Federal Reserve will hold the Fed Funds Rate at the 5%-5.25% range, increasing to 95%, compared to 81% a day earlier. Likewise, the odds of the Fed resuming hikes in July increased to 60% from 50% a day earlier. Meanwhile, the Raw Materials Sector led market gains driven by rising commodities including metal prices on optimism over demand after China cut its short term rates to bolster its post-pandemic recovery. The Energy Sector was also racked up gains following the accommodative move on the global economy from the Bank of China. The Europe also reported Inflation levels that were safely under control, as evidenced by the German CPI (May) coming in at 6.1% yoy, successfully slipping from April at 7.2%. As for Germany and the Eurozone, economic sentiment in June is slightly more optimistic. Even in the UK, the labor market seems to remain heated with wage growth data still on an upward trend and unemployment claims declining. The UK also reported an above-expectation increase in new jobs in April of  250k (vs forecast 150k, vs previous 182k). Later in the afternoon, we will look forward to UK GDP data for April, as well as their Industrial Production,  Manufacturing Production, and Trade Balance. In the evening, all eyes will be on one more important data from the US before the FOMC Meeting decision, namely PPI (May) or producer-level inflation, which is also expected to tame.

JCI closed slightly lower but still above the 6700 barrier ahead of this week’s Trade Balance data and FOMC Meeting decision; followed by Foreign Net Sell worth IDR 115.33 billion, increasing foreign outflows from Indonesian stocks to IDR 1.79trillion this week alone. However, monthly and YTD foreign buying interest is still positive at IDR 2.65 trillion and IDR 19.73 trillion respectively. Indonesia reported a 1.5% yoy increase in Retail Sales in April, slowing from 4.9% the previous month; the third consecutive month of slowdown as consumption weakened due to high costs. Considering the above market sentiment, NHKSI RESEARCH expects bullish condition can still be maintained, although the breakout of the crucial Resistance level of 6735-6765 may have to wait for the FOMC Meeting decision in the early morning (will be known by most market participants tomorrow morning) ; causing us to recommend Wait & See if we want to add portfolio position.

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