The S&P and Nasdaq closed weaker in the first trade of seasonally slow August, ahead of US jobs data and major companies’ earnings reports later this week. As noted, US stocks ended July on a strong footing, as investors welcomed better-than-expected second quarter earnings reports. Positive sentiment also came from hopes of a soft landing for the economy which has stayed resilient as inflation has cooled with rising interest rates. The benchmark S&P 500 hit a 16-month high on Monday, and is less than 5% away from breaching its record high closing level notched on Jan. 3, 2022. US second-quarter earnings are now expected to fall 5.9% from a year earlier, Refinitiv data on Tuesday showed, compared with a 7.9% decline estimated a week earlier. US manufacturing appeared to have stabilized at weaker levels in July as new orders gradually improved, while a survey showed factory employment dropped to a three-year low, suggesting that layoffs were accelerating. The US ISM Manufacturing PMI (July) came in at 46.4 which was lower than the estimate of 46.8 but a slight improvement from the previous month’s 46.0. ISM Manufacturing Employment (July) weakened to 44.4, the lowest level since August 2020. On the other hand, JOLTs Job Openings for June fell to 9.582mn from 9.616mn in the previous month. Signs of weaker labor demand are likely to be welcomed by the Federal Reserve and increase expectations that there may be no need for further interest rate hikes. Oil prices edged lower on a stronger dollar and signs of profit-taking after a rally in July when investors bet on tighter global supplies and demand growth in the second half of 2023. The dollar index, a measure of the greenback against six major currencies, rose 0.40%. A stronger dollar makes crude more expensive for investors holding other currencies. To revive China’s private sector amid a flagging economic recovery following a protracted period of COVID restrictions, Chinese ministries, regulators and the central bank on Tuesday pledged more financing support to small businesses. Meanwhile, data released on Monday potentially curbed market enthusiasm as data showed Euro Zone manufacturing activity contracted in July at the fastest pace since May 2020, although the Euro Zone Unemployment Rate (June) did not budge from 6.4% (same as the previous month), the lowest level in more than 20 years. On the supply side, this Friday’s OPEC+ meeting is expected to see Saudi Arabia roll its voluntary cuts through September, further tightening supplies. OPEC oil output fell in July after Saudi Arabia made an additional voluntary cut as part of the OPEC+ producer group’s latest agreement to support the market, and an outage curbed Nigerian supply, a Reuters survey found on Monday. From the Asia region, South Korea and Japan successfully reported higher than expected Manufacturing PMI (July) although both still stayed in contraction territory aka below 50 points. While the Nikkei Manufacturing PMI (July) level for Indonesia was more expansionary at 53.3, up from June at 52.5. Indonesia reported a more manageable July Inflation at 3.085 yoy, lower than the expected 3.1% and the previous month’s 3.52%. Core Inflation also tamed further at 2.43%, lower than a forecast of 2.5% and June’s 2.58%. As for this morning, South Korea has reported CPI growth (July) at 2.3% yoy and 0.1% mom, both below expectations. Speaking of PMIs, France, Germany, Euro Zone and the UK reported PMIs that weakened further in contractionary territory. Later in the evening, the world will again monitor employment data from the US,
JCI closed below the first support, MA10, making 6895-6900 the closest resistance level at the moment. NHKSI RESEARCH considers that there is still further consolidation potential, at least towards the next support at MA20 / 6835-6840. Indonesian capital market investors/traders are advised to Wait & See and hold further purchases.
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