Today’s Outlook:
• Global stocks moved in positive territory on Monday trading (18/03/24) while sovereign bond yields moved up ahead of a number of central bank meetings this week, one of which may end the era of negative interest rates in Japan, and the other sets the path for US interest rates this year. MSCI indexes rose 0.47% at the close of trading in New York, supported by encouraging Industrial Production and Retail Sales data from China. On WallStreet, NASDAQ again led the gains by surging 0.82%. Market participants have been anticipating the US FEDERAL RESERVE’s decision to hold interest rates at 5.25% – 5.50% at the FOMC Meeting, the results of which will be released at approximately 1:00pm WIB on Thursday, and most importantly, investors are waiting for further clues on when a rate cut could occur. The chance of a pivot occurring in June has dropped to 56% from 75% a week ago. Given the strong US economic data, analysts are beginning to expect that the US rate-cutting cycle may be slower than initially expected, forecasting only 72 bps of rate cuts this year compared to more than 140 bps a month ago. The thinking sent the 2-year US Treasury yield up 0.9 bps to 4.7319% (after they crept up 24 bps last week), while the 10- year yield rose 2.8 bps to 4.332%. The Fed is also expected to reduce the amount of its bond sales to USD 30 billion per month. Before the Fed, today market participants have their eyes on the BANK OF JAPAN, which will determine whether their nearly decade-long super-loose monetary policy will come to an end (although there is a possibility that they will postpone the important decision until April, coinciding with the release of the latest economic projections). Apart from these two countries, there are at least 9 central banks scheduled to hold interest rate decisions this week (Indonesia is one of them), most of which are unlikely to change their current interest rate levels, although surprise moves are possible. Other economic indicators to look out for today are: Industrial Production from Japan, FDI from China, German ZEW Economic Sentiment (Mar), and Building Permits & Housing Starts (Feb) from the US.
• EUROPE MARKETS: EUROZONE reported that Inflation in February managed to ease to 2.6% yoy as expected, from 2.8% in the previous period. Core Inflation was also subdued to 3.1% yoy from 3.3% in January.
• COMMODITIES: global OIL prices rose about 2% to touch a four-month high at the close of trading on Monday, driven by a decline in crude oil exports from Iraq and Saudi Arabia. In addition, there were signs of strengthening demand and economic growth in China and the US. Iraq, OPEC’s second-largest producer, said it will reduce crude exports by 130,000 barrels/day to 3.3 million bpd in the coming months to compensate for the excess OPEC+ quota since last January. In January & February, Iraq pumped significantly more oil than the target agreed with OPEC+. Meanwhile, Saudi Arabia, OPEC’s largest producer, lowered its crude exports to 6.297 million bpd in January, from 6.308 bpd in December. Elsewhere, Ukraine’s attack on Russia’s energy infrastructure is estimated to have shut down about 7% of oil refining capacity in the first quarter. This will prompt Russia to increase oil exports through its land ports in March by nearly 200,000 bpd to around 2.15 million bpd. GOOD NEWS FROM CHINA, the world’s largest oil importer; they reported a 7% annual increase in industrial output in January & February, along with a 4.2% yoy increase in fixed assets (Feb), amid a 5.5% year-on-year increase in retail sales (actually missed expectations). However, the turmoil in the real estate sector remains a headwind as property investment fell 9% year-on-year, highlighting the need for further policy support. China’s crude oil production rose 3% yoy in January & February. Coupled with the Fed’s projected interest rate cut this year is expected to further boost global economic growth and oil demand.
• In other commodities, GOLD prices edged up 0.1% to USD 2164.05/ounce on the back of market participants’ expectations that the Federal Reserve may not be so dovish at this week’s FOMC Meeting. ANZ analysts project that gold prices could weaken to USD 2100/ounce in the near term, but they also upgraded their year-end target to USD 2300/ounce, anticipating that the realization of the pivot and weakening overall economic conditions will support gold as a safe-haven asset. From industrial metals, COPPER prices eased slightly after hitting an 11-month high last week, after China reportedly cut production at their largest copper smelter. That rally has now stalled following mixed Chinese economic data above, plus their unemployment rate is currently at a 5-month high.
• JCI is firmly entrenched in its PARALLEL CHANNEL patterned upward trajectory, although it would be better if JCI can break its nearest Resistance, MA10 & MA20, to above 7345; thus opening up the opportunity for strengthening towards 7400s level again. NHKSI RESEARCH suggests Average Up when JCI can stabilize above 7350, but considering Indonesia will also be full of domestic turmoil this week related to the announcement of the election results by the KPU, there is no harm for investors to maintain a WAIT & SEE attitude for a while.
Company News
• TPIA: Spin Off 3 Business Units
• HMSP: Earned IDR8.09 Trillion Profit
• SDRA: Right Issue IDR500/Shares
Domestic & Global News
• Nearing the End of His Reign, Jokowi Approves 14 New National Strategy Projects (PSN)
• China Economy: Manufacturing Performance Advances
Download full report HERE.
