Today’s Outlook:
• The three major US indexes started the first week of July (which was cut short by the 4th of July Independence Day holiday on Thursday) on a positive note, riding on the wave of the bull rally of the previous quarter. During the second quarter, the S&P 500 and NASDAQ Composite gained 3.9% and 8.3% respectively, while the Dow Jones Industrial Average fell 1.7%. On Monday trading (01/07/24) the Technology sector returned to boost the NASDAQ and led the gains by rising 0.8%, ahead of a number of important monthly labor reports from the US to be released throughout this week. JOLTs JOB OPENINGS (May) due out on Tuesday (forecast: 7.86 million new jobs, vs previous: 8.06 million) and further clues on monetary policy should be the initial focus of investors this week ahead of June Nonfarm Payrolls data due out on Friday. The resilience of the labor sector is a key consideration for the Fed in its interest rate cut decision. Ahead of the Nonfarm Payrolls data, the Federal Reserve will release the June FOMC Meeting Minutes, where many are waiting to get fresh clues on the US central bank’s monetary policy outlook after the Federal Reserve signaled that it now expects only 1 cut this year, from a previous forecast of 3 cuts. Fed Chairman Jerome Powell will be at the European Central Bank’s annual forum in Portugal on Tuesday, but Powell is not expected to say much about monetary policy, other than continuing to emphasize that they will continue to hold on to economic indicators before gaining enough confidence to start lowering interest rates, Deutsche Bank predicted in a recent note. Speaking of economic indicators, ISM data showed US manufacturing activity unexpectedly fell further into contraction territory in June, with a reading of 48.5, below the 49.2 forecast. As noted, a reading below 50 indicates contraction.
• MARKET DIRECTIONS: Global hedge funds are selling shares of US Technology, Media and Telecommunications (TMT) companies at the fastest pace since 2016, with Semiconductor & Software stocks accounting for most of the selling, according to Goldman Sachs in a recent note although the reason behind the sell-off is yet to be determined. On the other hand, they increased allocations to the Technology Hardware and Electronic Equipment sectors. Technology stocks have led the strong performance of the S&P 500 index in the first half of the year, with artificial intelligence chipmaker NVIDIA rocketing 150% and accounting for 30% of the index’s 15% gain so far. In overall, Goldman Sachs said hedge funds have net sold global equities for 3 consecutive months (in the largest amount since June 2022), almost entirely driven by short sellers who borrow stocks to sell them on the bet that prices will fall, allowing them to buy them back at a cheaper price.
• FIXED INCOME: The sharp rise in US Treasury yields has the potential to trip up regional and emerging equity markets in particular. The 10-year US Treasury yield jumped 13 basis points to 4.50% on Monday – the highest yield and biggest one-day gain in a month – as investors priced in the potential impact on inflation of contentious fiscal, tariff and immigration policies under Donald Trump.
• ASIA & EUROPEAN MARKETS: A similar situation hit the JAPANESE YEN again as the currency fell to a 38-year low, at 161/USD. There is no sign of the Japanese central bank making a move, to the extent that analysts expect them to wait for the 4th of July holiday when the market is quiet for an optimal market reaction. CHINA markets opened the new quarter with a glimmer of hope as the S&P Global PMI (May) recorded the manufacturing sector at its fastest pace of growth for 3 years; although the data was 180 degrees opposite to the official government PMI data which came out on Sunday showing a contraction in manufacturing activity. On the other hand, China is still struggling to nourish their Property sector as new home prices in June turned out to be stagnant in the last 5 months. SOUTH KOREA released its Inflation data (June) on Tuesday morning with the result of goods & services prices falling (deflation) 0.2% mom and rising 2.4% yoy, both figures were lower than the previous Reuters poll. Yesterday GERMANY announced preliminary estimates of CPI (June) at 2.2% yoy and 0.1% mom, both figures were lower than expected. Later this afternoon follows the preliminary EUROZONE CPI (June) estimate with a forecast: 2.5% yoy, expected to cool slightly from 2.6% last period.
• COMMODITIES: OIL prices rose about 2% to a 2-month high on Monday on hopes of increased demand during the northern hemisphere summer driving season and concerns that the conflict in the Middle East could spread and disrupt global oil supplies; plus the threat of major hurricane Hurricane Beryl to hit oil-producing areas in the Gulf of Mexico. BRENT futures rose 1.9%, to USD 86.60/ barrel, while US West Texas Intermediate (WTI) crude rose 2.3% to USD 83.38. It was the highest close for Brent since April 30 for 3 consecutive days and the highest for WTI since April 26.
• JCI recorded a gain of over 1% taking the JCI higher to 7139.63, supported by the first fresh foreign funds in July, Foreign Net Buy worth IDR 185.29bn (RG market). BANK INDONESIA reported Inflation (June) was safely contained at 2.51% yoy, Core Inflation cooled further to 1.90% yoy. NHKSI RESEARCH thinks the bullish mood can still be maintained until JCI reaches its mid-term TARGET/ resistance around 7225; this level will determine whether there will be a short consolidation or continue to break out towards the next TARGET: 7300-7400.
Company News
• DOID: Acquisition Complete, DOID Claims Atlantic Contributed USD130 Million in Revenue
• ISSP: Steel Pipe Industry Approves Dividend of IDR 105.9 Billion
• PTPS: Pulau Subur (PTPS) Will Distribute Dividends 28% of Net Profit
Domestic & Global News
BPS: June 2024 Inflation Rises 2.51 Percent
China’s Manufacturing Index Contracts Again in June 2024
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