Today’s Outlook:
• Global stock markets raced higher but the US DOLLAR weakened on Monday trading (19/08/24), following last week’s equity market surge driven by expectations that the US economy will be able to achieve a soft-landing, i.e.: avoiding recession while at the same time inflation flattens will pave the way for interest rate cuts. On Wall Street, equities continued to add to their latest gains. The Dow Jones Industrial Average rose 0.58% to 40,896, the S&P 500 gained 0.97% to 5,608, and the NASDAQ Composite shot up 1.39% to 17,876. MSCI’s broadest world stock index jumped about 1%. The S&P 500 and NASDAQ extended their winning streak to 8 consecutive sessions, the longest in 2024, on the back of stock prices continuing to recover from the sell-off 2 weeks ago triggered by recession fears. Yesterday’s rally followed the US stock market’s biggest weekly gain this year, with the three major indices surging between 2.9% and 5.3%.
• MARKET SENTIMENT: US Federal Reserve members Mary Daly and Austan Goolsbee at the weekend signaled possible easing in September, while the FOMC Meeting Minutes for the July meeting due this week are expected to underscore the dovish view. Fed Chair Jerome Powell is scheduled to speak at the Jackson Hole annual meeting on Friday and investors assume that his comments will further confident the possibility of a rate cut. The market is calculating for itself how much rates will be moved, where a 25bps rate cut seems to be almost fully priced-in, and there is a 25% chance of a 50bps cut. US government bond yields continued to fall on Monday; where the 10- year US TREASURY yield fell 1.9 bps to 3.873%, from 3.892% at the end of Friday. However, the prospect of lower borrowing costs couldn’t keep Gold prices from hitting record highs; leaving the Dollar weaker against the Euro, while the Yen moved higher. The US Dollar fell to a 7-month low and the Japanese Yen hit its highest point in over a week as traders awaited the Fed’s decision on an interest rate cut.
• GOLDMAN SACHS: lowered their calculated US recession odds to 20% (from 25% previously) and may reduce it further if the August US labor report due in September is seen as expected.
• BANK OF AMERICA: believes that US equities are well positioned to continue their upward trajectory, provided economic growth remains stable. BofA highlights that the stock market does not actually need aggressive interest rate cuts from the Federal Reserve, but rather signs that the central bank will support growth. Market focus has shifted from inflation to growth, with the S&P 500 reacting more strongly to macro & micro economic growth data than inflation numbers in recent months, according to BofA. They outlined three main reasons to continue the rotation into equities: easing interest rate pressures, supporting growth, and thickening corporate earnings.
• ASIA & EUROPE MARKETS: It looks like ASIA markets are off to a solid start today, with investors’ appetite for risk picking up on the back of a lower Dollar, muted volatility, and the S&P 500 and Nasdaq recording their longest winning streaks of the year. The main exception may be the JAPAN market, which could come under pressure again thanks to the Yen’s rise against the Dollar, plus talk of the Japanese Government planning to raise its estimate of the long-term interest rate used to construct the country’s budget to 2.1% for the next fiscal year from 1.9% for the current year, the Nikkei business daily reported on Monday night. The plan reflects rising government bond yields as the BANK OF JAPAN raises interest rates in a shift away from a decade-long stimulus program. Earlier, the NIKKEI 225 index closed down 1.77% at 37,388.62, snapping a 5-day winning trend that pushed it up 8.7% last week. Meanwhile, from neighboring Bamboo Curtain Country, CHINA blue chip stocks closed around 0.3% higher; crawling up for a third day on Monday, moving away from last Thursday’s 6- month low, as investors turned their attention to the People’s Bank of China’s latest interest rate decision this Tuesday. Although CHINA’S economy may still need more stimulus, the PBOC is not expected to surprise with another rate cut as it did last July and opted to keep borrowing costs in place. In a Reuters survey of 37 market watchers, all respondents expect their 1-year and 5-year base lending rates to remain on hold at 3.35% and 3.85% respectively. As for continental EUROPE, the stock market in general moved about 0.6% higher, touching its highest level in more than 3 weeks in a broad market advance, while the FTSE 100 leading index rose 0.55%. Investors are looking forward to the Purchasing Managers’ Index (PMI) data for the UK, FRANCE, GERMANY, & EUROZONE to be released this week.
• COMMODITIES: OIL prices fell as concerns about demand from China continued to weigh on sentiment. US WTI crude fell 2.9% to USD 74.42/barrel and BRENT fell to USD 77.79/barrel, a loss of 2.37%.
• JCI was dragged up in the last minutes of trading last Monday, resulting in a successful close of 34.74 pts / +0.47% to the level of 7466.83, creating a new highest Closing record level; supported by foreign spending worth IDR 599.53 billion, accumulating YTD Foreign Net Buy coffers of nearly IDR 5 trillion (all markets). The RUPIAH exchange rate position is getting better with a perch at 15550 / USD. NHKSI RESEARCH considers it is reasonable that the strengthening of the market makes market participants a bit nervous since it is at the highest point in the history of JCI, but we also see that the rotation sector still has the potential to support the index to go higher, towards our TARGET (end of year) at 7600 (conservative), or 7800 (bullish scenario). On the safe side, we always remind you to set a TRAILING STOP, in case the market reverses to pullback first.
Company News
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• WIFI & INET: Increase Profit Potential, INET Maximizes Surge (WIFI) Backbone
• PGEO: Partnering with Ecolab, PGEO Develops This Technology
Domestic & Global News
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