Today’s Outlook:
• The S&P 500 fell 1% on the first day of October trading on Tuesday as investors abandoned riskier assets on growing concerns about an escalation of CENTRAL EAST CONFLICT after Iran launched several missiles into Israel in retaliation for Israel’s campaign against Iran’s ally Hezbollah in Lebanon. Israel itself said that such a serious attack would inevitably have consequences (relaliation). The escalating tensions in the Middle East began to shake investor confidence, especially regarding the stability of the US stock market, which was already highly valued. The plunge in stocks was followed by the movement of investors to safe-haven assets such as government bonds and the US Dollar. The S&P 500 fell by 1.4% but then pared losses to close down 0.9%, while the NASDAQ Composite plummeted by 2.3% but also bounced back to end the day down 1.5%. Nervous traders/investors immediately hunted for other investment instruments such as gold, government bonds, and the Dollar. Market participants based their decision after remembering the Russia – Ukraine War in 2022 and its effect on high but short-lived market volatility. This time, further market reaction will depend on Israel’s response and whether the conflict between the two arch-enemies escalates. As for the three major Wall Street indices so far, they posted gains in September and the third quarter, which was the first positive September for the S&P 500 since 2019. As noted, the S&P 500 has now shot up more than 20% this year – the first time since 1997 that the benchmark index has risen 20% or more during the first 9 months of the year.
• ECONOMIC INDICATORS:
– JOLTS JOB OPENINGS (Aug) stated that 8.04 million jobs were created in Aug, higher than forecast & previous period which only ranged from 7.64 – 7.71 million. The release of this figure more or less alleviated fears of the US economy falling into recession, but is still overshadowed by the sluggish US Manufacturing sector in Sept where figures from S&P Global and ISM both show the US MANUFACTURING PMI is still far from expansionary levels.
– Tonight the ADP NONFARM EMPLOYMENT CHANGE (Sept) data will be monitored to record labor growth in the private sector with an estimate of 124k jobs created, up from 99k in Aug.
• COMMODITIES: The escalation of the Middle East conflict boosted OIL prices which jumped 3% on Tuesday; after rising 5% in one session, triggered by concerns of supply disruption in the region. Traders anticipated that crude supply disruption from the Gulf region would push prices sharply higher, a flashback to the previous Russia – Ukraine war.
• MARKET SENTIMENT:
– The CBOE VOLATILITY INDEX, an indicator of market “fear” levels, rose to a 3-week high of 20.73, before trimming its gains to stay at 19.25 (still below 20 which does not take into account a massive military scenario). Further market volatility is expected as we approach the November US presidential election.
– ATLANTA FED’S GDP estimate for third quarter US GDP growth was cut to 2.5% from 3.1% last week. This is the largest decline since Q3 tracking estimates were launched in late July.
• ASIA & EUROPE MARKETS:
– CHINA markets were closed due to the Golden Week holiday, and the main economic data releases were Inflation and Manufacturing PMI data from SOUTH KOREA, as well as Consumer Confidence from JAPAN. Figures from Seoul confirmed South Korea’s CPI fell to 1.6% in September from 2.0% in August. It was the lowest figure, and also the first time below the 2% threshold, since March 2021. This was followed by the S&P Global South Korea Manufacturing PMI figure falling to 48.3, the lowest in over a year (since Aug 2023).
– From the EUROPEAN continent, the Manufacturing PMIs from GERMANY & EUROZONE are still struggling in contraction territory, albeit strengthening slightly above expectations; but clearly losing out against the UK which has been steady at 51.5 (Sept) as predicted. Speaking of Inflation, EUROZONE CPI (Sept) came in at 1.8% yoy (as preliminary estimate) which is in line with forecast and lower than Aug’s 2.2%, thus exceeding the ECB’s Inflation Target of 2%.
• INDONESIA : released Nikkei Manufacturing PMI (Sept) figure strengthened to 49.2 from last month’s 48.9, but has not moved into expansion territory. Sept INFLATION was recorded safely contained at 1.84% yoy, down from 2.12% in Aug. This positive sentiment boosted JCI right at its medium term support around 7530 level, up to 7500. Technically, NHKSI RESEARCH sees that there is still strengthening potential for JCI towards the next TARGET/resistance which is the confluence of MA10 & MA20 at 7735-7740. Our best ADVISE : is to pay attention to the rolling market interest and if there is a general strengthening of prices, it can be used as an opportunity to reduce positions at better prices considering the level of uncertainty & volatility in the market at this time.
Company News
• DEWA: Profit Grows 11.60 Percent, Dewa’s June 2024 Deficit IDR 1.07 Trillion
• MSIN: MNC Digital Sets 1:5 Stock Split Schedule
• JSMR: Jasa Marga (JSMR) Divests 30.18 JTT Shares IDR 12.8T, This is the Purpose
Domestic & Global News
Government Has Not Prepared Stimulus to Boost Manufacturing PMI, Airlangga: Wait for October 20
Israel Vows Response to Iran Missile Attack as Fears of Conflict Escalation Rise
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