Wall Street indexes closed lower on Tuesday (16/05/23), after a disappointing forecast from Home Depot, and several economic data such as US Retail Sales (Apr.) pointed to softer consumer spending, while uncertainty about interest rates and debt limit negotiations weighed on the market sentiment. The US Commerce Department reported that retail sales (Apr.) rose only 0.4%, short of the estimate for an increase of 0.8%. On the other hand, Industrial Production (Apr.) bounced back to 0.5% on a monthly basis, a much better result than the -0.1% forecast. It is undeniable that recent data has indicated a slowing in the US economy as a result of a string of rate hikes by the Federal Reserve to fight high inflation. These soft landing signs happened along with recent negotiations over the US debt ceiling, led the market to await when the central bank will pause hiking or cut interest rates. Several comments from Fed officials stated they remain comfortable leaving the US benchmark interest rate at a high level for now. The slowing economic atmosphere was also sensed in Europe, where the UK reported that the Claimant Count Change (Apr.) increased to 46,700, higher than the forecast of 31,200, thus putting their Unemployment Rate at 3.9%, higher than the forecast & previous 3.8%. The German ZEW Economic Conditions & Sentiment (May) came out with mixed numbers but did not fully imply solid economic conditions; moreover, the ZEW Economic Sentiment (May) even showed a very weak reading of -9.4, much lower than the expectation of -1.0. Eurozone GDP for 1/2023 came out in line at 1.3% YoY, and they were able to post a Trade Balance (Mar.) of EUR 25.6 billion, greater than the previous period’s EUR 3.7 billion.

As the largest country in Asia, China has not been able to boost its economy as expected, as shown by the Industrial Production (Apr.) data which was only able to release at 5.6% (lower than the forecast of 10.9%). Their Retail Sales (Apr.) also only managed to rise to 18.4%, not as good as the predicted 21%, but YTD growth expanded to 8.46% YoY from the beginning of the year to the end of April (from 5.76% previously). Also, the Chinese Unemployment Rate fell slightly to 5.2% (vs forecast & previous 5.3%). The Indonesian stock market was dragged down by the negative sentiment of China’s disappointing macroeconomic data readings, resulting in another 0.52% / 35points drop to the level of 6676.56 and even back to the previous low level of 6658 as the closest support; followed by a foreign net sell worth IDR 595.79bn, bringing the Foreign Net Buy for the week to IDR 1.36trillion, although on a monthly basis, the foreign coffers in Indonesian stocks are still at around IDR 7.23trillion. NHKSI RESEARCH expects market sentiment to remain gloomy and warns of further downside potential as low as 6560-6550.

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