Today’s Outlook:
• Global stocks neared their highest levels in a month in Tuesday’s trading, while the Dollar hit an 8-month low, as investors focused on speculation that the US Federal Reserve could provide further clues on upcoming interest rate cuts. The S&P 500 snapped an 8-day winning streak, pressured by declines in Energy and Trade stocks that appeared cautious ahead of this week’s Jackson Hole Symposium. The Dow Jones Industrial Average fell 61 points, or 0.2%, while the S&P 500 lost 0.2% and the NASDAQ Composite lost 0.4%. This left MSCI’s index of global stocks unchanged near its strongest level in more than a month.
• MARKET SENTIMENT: With a relatively light economic data calendar this week, all eyes are on the release of the Fed’s July meeting minutes on Wednesday and Fed Chairman Jerome Powell’s speech at the Jackson Hole annual meeting event on Friday for clues on the outlook for US interest rates. Fed officials in recent days have signaled possible easing in September, preparing markets for a similar tone from Powell and other speakers at the annual meeting of global central bank chiefs in Jackson Hole, Wyoming. Evercore analysts say Powell will probably signal a possible 50 bps cut, although they don’t expect the Fed chair to explicitly mention how much the Fed plans to start cutting rates. The market is of the opinion that once the Fed starts cutting rates, the central bank will implement a similar strategy at (almost) every FOMC Meeting over the next 12 months; which sounds like a fairly aggressive move and is expected to bring down the Fed Funds Rate to the 3.25% – 3.50% range by next year. It is this prospect of monetary policy easing that is supporting the recent stock market rally.
• FIXED INCOME & CURRENCY: In line with expectations of lower interest rates, the 10-year Treasury yield fell to 3.818%. The market fully expects a 25 basis point rate cut from the Fed next month, with about a 25% chance of a 50 basis point cut. Expectations of a dovish outcome from the Fed this week saw the US DOLLAR sink to its lowest level in almost 8 months against the Euro, which peaked at USD 1.12775 on Tuesday. The POUNDSTERLING briefly touched its highest level in over a year and was last bought at USD 1.30540. The DOLLAR INDEX was last at 101.41, the lowest since January. Against the Yen, the Dollar was down 0.8% at 145.34, with traders looking forward to Bank of Japan Governor Kazuo Ueda’s appearance in parliament on Friday, where he will discuss the central bank’s decision last month to raise interest rates. As noted, the BOJ’s hawkish stance had injected huge volatility into the market as investors aggressively unwound Yen-funded carry positions, consequently rattling stocks globally. The market turmoil has since subsided after BOJ Deputy Governor Shinichi Uchida earlier this month played down the possibility of further rate hikes in the near future.
• US POLITICAL MAP: This week’s focus is also on the Democratic National Convention, where US President Joe Biden will speak at the event. Vice President Kamala Harris was officially nominated as the party’s presidential candidate in early August, and chose Minnesota governor Tim Walz as her running mate. Harris was endorsed by Biden in July, and is seen quickly catching up with Republican front-runner Donald Trump in recent polls, indicating a tight race in the 2024 presidential election. Robert F. Kennedy Jr. is considering dropping out of the race for the White House and may instead consider joining Republican presidential candidate Donald Trump. ASIA & EUROPE MARKETS: In Europe, the STOXX 600 index fell 0.5%, having recovered considerably from the recent global sell-off triggered by fears of a US recession. Those fears have eased in the past week with the opinion that a US economic recession is not imminent, citing strong US retail sales, upbeat business surveys, improved jobless claims, and benign inflation readings. MSCI’s broadest index of Asia-Pacific shares outside Japan hit its highest level in a month before giving up some of the gains to trade 0.3% higher. Japan’s NIKKEI 225 climbed to its strongest level in more than two weeks, closing up 1.8%, but CHINA’S leading shares fell 0.7% on continued concerns over the country’s bleak economic outlook. HONG KONG’s HANG SENG index deflated 0.3%.
• COMMODITIES: GOLD spot prices touched another record high at USD 2531.60/ounce, supported by a broadly weaker US DOLLAR and expectations of an upcoming US interest rate cut. OIL prices extended earlier losses, with BRENT last down 0.6% to USD 77.21/barrel, while US WTI lost 0.7% to USD 74.04/barrel. Oil prices shrank after there was renewed uncertainty about the ceasefire deal in Gaza after Hamas said that the current agreement was changed from the more acceptable July 2 deal. The group also denied comments by US Secretary of State Antony Blinken that it had backed out of the deal. The statement from Hamas came after Blinken announced that Israeli Prime Minister Benjamin Netanyahu had accepted a peace proposal brokered by Washington to address disputes that have stalled a ceasefire deal in Gaza.
• JCI recorded a new all-time high on Tuesday, touching a high of 7538.16 and closed up 67.15pts/+0.90% at 7533.99. Today’s BI RDG will be in the spotlight for domestic market players with BI7DRR rate expected to be kept at 6.25%, although RUPIAH has experienced significant strengthening against USD in the past week (+1.41%) and is currently at 15413/USD. Foreign buying flow in the equity market has intensified with IDR 1.80tn of buying yesterday (RG market), bringing the YTD position slowly narrowing the Foreign Net Sell in the RG market to just IDR 8tn again (compared to the largest foreign net sell last June which touched IDR 36tn). Objectively, NHKSI RESEARCH must admit that the uptrend is still intact, even though RSI started to show negative divergence, and the potential of creating new record points every day can be realized through sector rotation.
Company News
• PANI: Aguan-Salim (PANI) Issuer’s Profit Surplus 35 Percent, Take a Peek at These Drivers
• ULTJ: Ultrajaya (ULTJ)’s Revenue and Profit Increase in the First Half of 2024
• WIKA: Pay off Sukuk Next Month, Wijaya Karya (WIKA) Spends IDR 325.5 Billion in Cash
Domestic & Global News
ESDM Drafts PLTU Early Retirement Roadmap Rules
Argentina Quarantines Grains Ship Over Suspected Mpox Case
Download full report HERE.
