Today’s Outlook:
• Wall Street’s major indices hit record highs after global markets recorded gains and US TREASURY yields increased on Thursday (19/09/24), as the start of the first interest rate cut cycle by the Federal Reserve in more than four years boosted investors’ risk appetite. The thought that the US economy is moving in a soft-landing scenario (= Inflation is safely under control while the economy is kept from falling into recession), supported a sharp rally in risky assets such as stocks. Technology megacaps rose, with Tesla and Meta posting solid gains. The Tech-focused NASDAQ Composite rocketed 2.51% to 18,013.98 points. The Dow Jones Industrial Average comprising blue-chips rose 1.26% to 42,025.19 points, while the benchmark S&P 500 index gained 1.70% and ended the session above 5700 for the first time. Both were at their latest all-time closing highs, for the umpteenth time. The Russell 2000 small-caps index also surged 2.1% on the back of an outlook that small-cap companies are also expected to enjoy reduced operating costs and more affordable borrowing costs in a low interest rate environment. Not only on Wall Street, MSCI’s world stock index of 47 countries jumped 1.66%, to 839.98.
• ECONOMIC INDICATORS:
— INITIAL JOBLESS CLAIMS for the week ending September 14 came in lower than the market expected, with data showing the number of Americans filing jobless claims fell to the lowest level in 4 months. (Actual: 219k versus forecast & previous data around 230k).
— US RATE CUT: The Fed expects 2 more cuts of 25 bps each this year, but markets expect more. CITI GROUP expects the Federal Reserve to cut rates by another 50 bps at the November meeting, but others believe that the Fed is more likely to deliver a 25 bps cut if labor market data continues to show a moderate slowdown.
• FIXED INCOME & CURRENCY: This contributed to a sell-off in US government bonds that pushed up yields. The benchmark 10-year US TREASURY YIELD hit its highest level in about 2 weeks at 3.768% and was last up 3.2 basis points to 3.719%, from 3.687% late Wednesday. Short-term bond yields were pressured after a separate data release showed Existing Home Sales in Aug fell to the lowest level since 2023. The 2-year US TREASURY fell 1.5 basis points to 3.5876%, from 3.603% late Wednesday. In the currency market, the US DOLLAR weakened in volatile trading. The DOLLAR INDEX, which measures the strength of the US Dollar against a basket of currencies including the Yen and Euro, fell 0.41% to 100.61.
• EUROPEAN & ASIAN MARKETS:
— THE BANK OF ENGLAND’S decision to keep interest rates at 5.0% did not dampen market spirits in Europe, with the STOXX 600 index last up more than 1%. POUNDSTERLING strengthened 0.5% to USD 1.3278.
— A busy week with interest rate decisions continues this Friday where the BANK OF JAPAN is in the spotlight. The BOJ may buck the global rate cut trend and instead prepare another rate hike as soon as October. The JAPAN YEN weakened 0.21% against the US dollar to 142.57 per dollar. However, prior to the Japanese central bank announcement, National CPI (Aug) data was released which showed an increase in Inflation to 3.0% yoy and 0.5% mom, from 2.8% & 0.2% in the previous month.
— Complementing today’s central bank moves, the PEOPLE’S BANK OF CHINA this morning will also shortly release their short & long term benchmark interest rate decisions which are expected to be held steady at 3.35% and 3.85% respectively.
• COMMODITIES: GOLD prices rose 1.15% to USD 2,588.34/ounce. OIL prices also jumped above 1%, supported by the view that lower interest rates will support stronger demand. BRENT crude oil futures climbed back above USD 74/barrel for the first time in over a week, and closed at USD 74.88, up 1.67% on the day. US WTI crude oil closed up 1.47%, at USD 71.95/barrel.
• JCI closed at a new record level of 7905.4 after touching an all-time high of 7910.56, gaining 76.26 pts / +0.97% on the back of significant foreign buying interest at IDR 1.98 trillion, thickening the Foreign Net Buy YTD to IDR 7.75 trillion so far. RUPIAH has no desire to move from the strengthening level even now it is getting more comfortable below 15300/USD. NHKSI RESEARCH estimates that the psychological level of 8000 is just a step away, which is very likely to be reached before the end of the year. However, we still advise to be a little vigilant since today is the end of the week which is prone to uncertainty factors while the index often records new record points every day.
Company News
• PGEO: Pursuing 1 GW Capacity Target, PGEO Speeds Up a Series of Projects
• HRUM: Received Approval, Harum Energy (HRUM) Finalizes IDR Trillion Buyback
• BFIN: BFI Finance (BFIN) Offers IDR 600M Bonds, Interest Rates 6.6-6.9 Percent
Domestic & Global News
Prabowo to Seek New Debt of IDR 775.87 Trillion in First Year of Administration
Israel unleashes heavy strikes on Lebanon as US, UK urge restraint
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