Today’s Outlook:
• The DJIA closed at a record high on Monday (15.07.24) amid increasing speculation of a September rate cut, after Fed Chairman Jerome Powell said recent inflation data has added to the central bank’s confidence that inflation is safely under control, and therefore could make the Fed more willing to cut interest rates (even though inflation has not yet reached the Fed’s target of 2%). The Dow Jones Industrial Average recorded a gain of 210 points, or 0.5%, to a record closing high of 40,211.72. The S&P 500 gained 0.3% after setting a new intraday record at 5,667.06, and the NASDAQ Composite appreciated 0.4%. The assassination attempt on Republican presidential candidate DONALD TRUMP is expected to boost his chances of victory, which will result in more ambitious trade policies as well as more lenient regulations on certain industries and issues related to climate change and cryptocurrencies. This is also expected to be able to boost the US DOLLAR going forward. Trump has also announced his vice presidential running mate, James David Vance. FINANCIAL REPORT season was characterized by the performance of a number of large financial institutions such as Goldman Sachs and Blackrock which reported increased profits and assets in the 2nd quarter, sending their share prices up. Market participants await further reports from Bank of America, Morgan Stanley and Netflix.
• THE DOLLAR INDEX weakened slightly on Monday after dovish comments from Fed Chairman Jerome Powell; in contrast cryptocurrencies rallied (Bitcoin rose >6% and Ether jumped >7%) after news of Trump’s assassination attempt broke. Trump has been a known supporter of cryptocurrencies. As for the market, it has fully priced in a rate cut of at least 25 basis points (bps) from the Fed in September, according to the CME FedWatch Tool, after data last week showed consumer prices fell on a monthly basis for the first time in 4 years in June. Later tonight there is a supporting economic indicator that is also closely monitored which is Retail Sales (Jun).
• ASIA & EUROPE MARKETS: THE BANK OF JAPAN (BoJ) is thought to have intervened in the market in a bid to prop up the Japanese currency last week, after a lower-than-expected US inflation report. Data from the central bank showed that authorities may have spent up to 3.57 trillion yen (USD 22.4 billion) in doing so on Thursday. CHINA brought another cloud over Asian market sentiment after releasing 2Q GDP at 4.7%, below forecasts of 5.1% and this year’s target of around 5%. No wonder Industrial Production and house prices there are also on a downward trend. This data further emphasizes the need for greater monetary and fiscal policy support from the Chinese government which is holding a large meeting every 5 years to draw a big map of their long-term social & economic policies. The 2nd quarter GDP results made several economists cut China’s economic growth forecasts going forward; BARCLAYS predicts growth in the second semester will only be around 4.5%, while JP MORGAN cut the year-end outlook to 4.7% from 5.2%; backed by several reasons, including: China’s economic imbalances continue to increase in a dangerous direction, due to trade tensions from various directions, not to mention later if Trump wins the presidential election. Therefore, it is expected that a correction direction will be inevitable. Meanwhile, from the European continent, GERMANY & EUROZONE will release the ZEW Economic Sentiment (Jul) which will say whether market participants have better optimism in the next 6 months about current business conditions. Note that yesterday the Eurozone released Industrial Production (May) which slipped further into negative territory, contracting 0.6% from -0.1% in the previous month.
• COMMODITIES: GOLD has gotten another boost from the forecast of CITIGROUP analysts who say that the precious metal has the potential to go up to USD 3000/ounce as financial fund flows show significant expansion/buying potential going forward. The Citi analysts highlighted the impact of previous Fed rate cuts on precious metals prices, noting that “the median return for precious metals was 13% in the 6-month period following the Fed’s first rate cut” in the last 4 cycles. They further emphasized that “12-month returns have averaged 20%+ over the past 2 episodes,” aligning with their gold price target of USD 2,800 to USD 3,000/ounce and SILVER price target of USD 38 to USD 40/ounce by mid to late 2025.
• In other commodities, global OIL prices depreciated at the close of trading on Monday, due to the strengthening of the US Dollar as a result of the assassination attempt on presidential candidate Donald Trump. US WTI crude oil futures for August 2024 delivery dropped 0.3% to US$81.96/barrel, on the New York Mercantile Exchange. Meanwhile, BRENT futures for September 2024 delivery, deflated 0.16% to reach US$81.96/barrel, on the London ICE Futures Exchange. The strengthening of the US Dollar makes dollar-denominated oil prices more expensive for non-US buyers and therefore will suppress buying interest. FYI, last week Brent prices fell more than 1.7% after 4 consecutive weeks of gains, while US WTI fell 1.1% due to weak oil demand in China. China’s crude oil imports fell 2.3% in the first half of the year to 11.05 million barrels/day. This was due to disappointing fuel demand and production cuts by independent refineries due to less attractive profit margins.
• INDONESIA: reported Trade Balance (June) surplus for the 50th consecutive month at USD 2.39bn, lower than expected, and the previous month at around USD 2.9bn. This was due to weaker Export growth than rising Imports. The sluggishness of China’s economy also affected our Export performance as China, U,S and India account for 43% of Indonesia’s Export market. JCI recorded its biggest daily decline since rising from the bottom on 19 June, corrected 48.7pts to 7278.86 after yesterday’s low of 7252.8 has hit the first support which is MA10. NHKSI RESEARCH expects that this Support level could be tested again today, which if it fails to hold will bring JCI to slide deeper towards the next Support: around 7210-7200 / 7100-7080. Therefore, the Trailing Stop suggestion that we have been echoing lately should still be appropriate to be applied again in anticipation of the upcoming potential consolidation.
Company News
• ROTI: Salim Group (ROTI) Issuer Strives to Buyback Shares
• ZYRX: Increase Production, Zyrex (ZYRX) Builds New Factory
• BELI: Blibli.com (BELI) Spent All IDR 7.9T IPO Funds
Domestic & Global News
June 2024 Trade Balance Recorded a USD 2.39 Billion Surplus, 50 Months in a Row
Trump Picks J.D. Vance for Running Mate, Formally Wins Republican Presidential Nomination
Download full report HERE.
