Today’s Outlook:
• The S&P 500 started the second quarter weakly on “April Fool’s Day” Monday (01/04/24) as a spike in US Treasury yields held back the bullish wave after an unexpected expansion in factory activity further confirmed the strength of the US economy and risked dashing investor expectations of a Federal Reserve rate cut in the near future. As a result, the DJIA led the weakness by shedding 240 points or 0.6%. The 2-year US Treasury yield, which is sensitive to the Fed’s monetary policy, rose 9 bps to 4.712% while the 10-year Treasury yield rose 12.3 bps to 4.317% (after touching a 2-week high of 4.337%); after the ISM manufacturing purchasing managers’ Index unexpectedly rose in the expansionary zone for the first time since September 2022, with a reading of 50.3 for March from 47.8 in February; indicating an improving trend in the manufacturing sector which had been battered by rising interest rates. Meanwhile, prices paid for the index’s related components, one of the Inflation benchmarks, jumped to 55.8 from 52.5 in the previous position, implying that raw material prices rose to their fastest pace since July 2022 (as cited by Oxford economists). The above data supported Federal Reserve Chairman Jerome Powell’s message on Friday that the central bank does not need to rush to cut interest rates amid signs of a strong economy. Even Fed Governor Christopher Waller & Atlanta President Raphael Bostic commented that they thought it was better not to have to cut rates 3x this year. No doubt the chances of a rate cut happening in June immediately deflated to 56%, from 64% last week, according to Investing.com’s Fed Rate Monitor Tool. Investors will get more clarity on this matter next week, where it is expected that 13 out of 19 Fed officials will comment further.
• In other indexes, NASDAQ was still able to gain 0.1% on the back of Alphabet up 3% and Microsoft appreciating almost 1% on the tech giant’s plan to separate Teams (their chat & video app) as a separate product from Microsoft Office. The Energy sector was also one of the few that managed to post a gain on the back of higher crude oil prices.
• COMMODITIES: OIL prices held near their highest level in 5 months as the market anticipates tighter supply due to OPEC+ production cuts as well as the effects of attacks on Russian refineries, coupled with Chinese manufacturing data supporting the outlook for stronger demand. BRENT rose 42 cents to USD87.42/barrel, while US WTI crude rose 54 cents to USD83.71/barrel. GOLD was lifted to fresh record highs by Friday’s PCE price index report which boosted expectations of a looser US monetary policy. However, Gold’s gains were hampered by the rising US Dollar & bond yields. In theory, Gold prices do tend to be inversely related to interest rates because as interest rates rise, Gold becomes relatively less attractive. Gold prices on the spot market hit an all-time high of USD2,265.49/ounce earlier in the session, before eventually closing 0.9% higher at USD2,236.50/ ounce.
• ASIAN MARKETS: While European markets were still in a holiday mood last Monday, CHINA stocks led the rally in most Asian markets on the back of an upbeat global economic outlook, while the Dollar Index rallied 0.47% after data showed the US manufacturing sector grew expansively. On the other hand, JAPAN stocks fell into the red with the Yen hovering near levels that keep traders wary of currency intervention. The yen is hovering below 152/dollar. Japan’s Nikkei closed down 1.4%, weighed down by concerns about Yen buying interventions that would hurt exporters’ profit prospects and returns for foreign investors.
• JCI plunged 83.75 points/1.15% to 7205.06 after market participants reacted to the March Inflation result which accelerated to a 7-month high. Indonesia’s March CPI crept up to 3.05% yoy from February’s 2.75%, exceeding expectations of 2.91% and has also started to encroach on the central bank’s upper limit of 3.5% for 2024. This is the highest rate of Inflation since last August, where food prices rose the most in 18 months amid the fasting month of Ramadan and ahead of Eid al-Fitr celebrations. On a monthly basis, CPI rose 0.52%, also at a faster pace than 0.37% in February, which was the highest monthly gain since December 2022 and beat estimates of 0.39%. Technically, the JCI is still safely above support around 7150 although it briefly touched 7140 yesterday. Despite the RSI almost approaching Oversold territory, it is not certain that this pullback will end quickly amid hopes of limited downside potential. NHKSI RESEARCH prefers to advise market players to WAIT & SEE while waiting for the market to stabilize, amidst the weakening Rupiah exchange rate almost approaching the psychological level of IDR16000/USD which may still have the potential for further consolidation due to the long Idul Fitri holiday ahead.
Company News
• BIRD: Net Profit Soars 26 Percent
• ERAA: 2023 Sales Reach IDR60 T
• AMAR: Partnering with eFishery for MSMEs
Domestic & Global News
• Budget Allocation for the 2024 IKN Project Reaches IDR 35.45 Trillion, Here are the Details
• Trapped Vessels Start to Move out of Baltimore Following Bridge Disaster
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