Today’s Outlook:

• The rally in global stocks stalled on Wednesday after a lengthy recovery pushed them close to recent record highs, just as investors awaited confirmation that the US Federal Reserve would cut interest rates as expected. Fed officials last month leaned heavily toward cutting rates at their September policy meeting, according to the minutes of the July 30-31 FOMC Meeting. Fed Chairman Jerome Powell is expected to further cement the view that the central bank will begin to ease monetary policy after taming the worst pace of inflation in 40 years, when he speaks on Friday at the Federal Reserve’s annual conference in Jackson Hole, Wyoming. In response to the sentiment, Wall Street remained relatively flat with the Dow Jones Industrial Average up 0.13% to 40,889, the S&P 500 up 0.42% to 5,620 and the NASDAQ Composite appreciating 0.57% to 17,918. The MSCI All Country Index of global stocks crept up 0.4%, close to its mid-July record high and already up 13.9% for the year. Interest rate futures have fully priced in a Fed Fund Rate cut of 25 basis points next month, with a one-third chance of a rate cut of 50 bps. Nearly 100 bps of cuts are expected to materialize this year, and another 100 bps next year. Strategists think the market will move limited until after the US Election in November, amid high levels of uncertainty in the last 4 months of the year.

• ECONOMIC INDICATORS: The US Bureau of Labor Statistics revised down jobs created in March 2023 – March 2024 by 818,000, as part of the agency’s annual benchmark payroll data review. Although lower than the predicted 1 million job losses, this revision brings the average number of jobs created in the 12 months to March to 174,000, further down from the previous pace of 242,000. Today a wave of PMI data will come out across the globe, including in the US, Europe and Asia.

• ASIA & EUROPE MARKETS: In EUROPE, the STOXX index of 600 companies rose about 0.3%, also close to its all-time record high, reached on June 7. While on the ASIAN continent, MSCI’s broadest index of Asia-Pacific shares excluding Japan actually fell 0.3%. HONG KONG’s HANG SENG retreated 0.7% after JD.com plunged 8.7% as major shareholder Walmart plans to sell its large stake. Japan’s NIKKEI lost 0.3% as they faced resistance around the 38000 level after recovering from the early August sell-off. A few things will take center stage in Asia this Thursday: PMI data will come from: JAPAN, AUSTRALIA, & INDIA; plus Inflation figures from MALAYSIA, as well as several corporate earnings reports from CHINA & HONG KONG, in particular Baidu’s (China’s largest search engine) second quarter results which are expected to see revenue decline for the first time since the fourth quarter of 2022 due to falling advertising sales. After the Bank of Thailand, BANK OF INDONESIA, and People’s Bank of China all kept their benchmark interest rates unchanged this week, attention turns to the BANK OF KOREA’s decision today, which is expected to keep its interest rate unchanged at 3.50%, where it has been since January last year. More or less in line with Indonesia’s view, analysts expect the Bank of Korea to wait until the Fed starts cutting interest rates before easing policy in the fourth quarter. With inflation rising 2.6% in July from an 11-month low of 2.4% in June, which is further away from the central bank’s 2% target, the Bank of Korea may need to see prices stabilize before it starts easing policy.

• FIXED INCOME & CURRENCY: The 10-year US TREASURY yield fell 2.3 basis points to 3.795%, from 3.818% at the end of Tuesday. The 2-year yield, which usually moves in line with interest rate expectations, fell 6.9 bps to 3.9305%, from 4% at the end of Tuesday. The falling US DOLLAR has returned the YEN to 145.135/USD aka a two-week high from last month’s 38-year lows; while the Chinese YUAN is set at a one-month high. The EURO is also up around 3% in August and at around USD 1.115 it is at its highest level since early December.

• COMMODITIES: OIL prices fell, while Dollar weakness due to increasingly solid US rate cut prospects kept GOLD near record highs on Tuesday. Gold prices fluctuated around USD 2,510/ounce. Oil prices fell again on Wednesday, with US WTI melting 1.69% to USD 71.93/barrel and BRENT dropping to USD 76.05/barrel, a 1.49% drop. Oil prices fell again on concerns about the US economy after a sharp revision in the employment numbers sparked fresh concerns about global demand in general, masking the reality of a larger-than-expected decline in US crude stocks. Data from the US Energy Information Administration showed that US crude inventories fell by 4.7 million barrels in the week ended August 16, twice as high as expectations of a decline of only 2 million barrels. Indeed, crude oil prices have suffered heavy losses in recent sessions due to ongoing concerns over slowing demand from the largest importer, China. Since peaking above USD 82 on Monday last week, Brent has slumped 6.2% by Tuesday’s close, while the Nymex contract is down 7.5% at the same time. The price slump may make OPEC+ rethink its plan to phase out voluntary production cuts from October to 2025.

• MIDDLE EAST CONFLICT: Israel has allegedly agreed to a temporary ceasefire deal initiated by the US, although the details of the deal remain to be negotiated, with Hamas reportedly criticizing the new deal as reflecting American bias against Israel. Hamas also issued a statement criticizing US President Joe Biden, as US Secretary of State Antony Blinken was seen actively traveling around Egypt, Qatar, and Israel earlier this week to broker a ceasefire. Israel meanwhile continued its offensive against Gaza, further complicating the prospects of a ceasefire.

• INDONESIA: On Wednesday, Bank Indonesia Governor Perry Warjiyo said that a support for the RUPIAH is needed to help lower import costs, especially food prices. JCI recorded a new all-time-high of 7594.54 on Wednesday, one step away from NHKSI RESEARCH’s (conservative) year-end JCI target; although it finally closed at 7554.59 (aka gained 20.6pts / +0.27%) on the back of sustained high Foreign Net Buy of IDR 1.80 trillion (all market). The RUPIAH exchange rate position is still at 15400s/USD level for the past two days, with USD/IDR closed at IDR 15480/USD yesterday. NHKSI RESEARCH suggests to pay attention to which sector rotation that could support further market strengthening, while paying attention to the domestic political situation that has the potential to contribute uncertainty factors that make market participants uncomfortable ahead of the 2024 elections.

Company News
• SGRO: Check Sampoerna Agro’s Interim Dividend Grid for Financial Year 2024
• RMKE: Related to 3 Mines Acquisition, RMK Energy (RMKE) Reschedules EGMS
• PANI: Private Placement Completed, PANI Controller Pays IDR 4.09 Trillion

Domestic & Global News
IKN Investment Groundbreaking Continues Next Month, Basuki: There are 8 Investors
Biden, in Call With Netanyahu, Stresses Urgency of Gaza Ceasefire

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