US stock markets closed significantly higher, with the Nasdaq leading a gain of 1.59% on Wednesday (23/08/23) buoyed by a surge in Nvidia’s share price ahead of the release of the company’s quarterly performance report which produces chips for artificial intelligence (AI) computing. Nvidia predicts third-quarter revenue will exceed the targets of Wall Street analysts; this optimism infected the shares of other technology companies which simultaneously went up. So far, Nvidia shares have supported the bullish sentiment on the Nasdaq by bagging a 220% YTD gain. In yesterday’s trading session, positive catalysts also came from the stabilization of the 10 year US Treasury yield from a 16-year high after economic data showed business activity weakening in the US & Euro Zone region as illustrated by the US S&P Global Composite PMI which appeared stagnant in August at 50.4 (weaker than forecast & previous period at 52); the weakest growth since last February, as demand for new business in the booming service sector is now starting to contract. Similarly, in the Euro Zone, the PMI contraction in August unexpectedly widened by falling to 47 (the lowest since December 2020), failing to meet expectations of 48.5 which was not much different from 48.6 in July; due to weak growth in the service sector. The contraction in Composite PMI was also experienced by a number of countries in continental Europe such as France, Germany, UK; however, this was not the case with Japan which reported growth in both the manufacturing and services sectors au Jibun Bank Japan Manufacturing PMI for August recorded closer to the expansionary border at 49.7, while the Services PMI was firmly in expansionary territory at 54.3. Adding to the sentiment from the economic data, later in the evening the US reported Building Permits which came out almost in line with estimates at 1.443 million units; New Home Sales in July also experienced an aboveexpected increase of 714 thousand units and on a monthly basis rose quite massively by 4.4% mom. From the Asia, South Korea this morning released its July producer-level Inflation data which turned out to increase 0.3% on a monthly basis, but slipped -0.2% yoy on an annualized basis. Japan noted that foreign investment in their bond and stock markets experienced a significant decline. Further today, market participants await the central bank decisions from South Korea & Indonesia regarding interest rates which are both expected to hold their benchmark rates at 3.5% and 5.75% respectively. Later in the evening, there will be further economic data from the US, where Durable Goods Orders (July) are expected to drop -4% in July, contrasting with a 4.7% gain in June. Initial Jobless Claims will be an important benchmark on interest rate trends, whether it will be released as predicted at 240k, which should be slightly higher than last week’s final reading of 239k. On the commodity front, the US surprised with a drop in their crude oil reserves with a 6.135 million barrel decline, much higher than the expected minus 2.85 million barrels, adding to the oil scarcity from the previous period which was already minus 5.96 million barrels. However, this fact did not stop CRUDE OIL (WTI) prices from closing lower from the early August low of USD 78.96/barrel, even dropping to USD 77.62, the lowest point since July 25.

On the other hand, JCI posted a slight gain of 4.96 points / +0.07% to 6921.4 level after a day of moving in the higher positive territory even approaching 6957.91 high, partly due to the small foreign buying interest of only IDR 27.72 billion (RG market), although on YTD basis the Foreign Net Buy figure is much more significant at IDR 14.94 trillion (RG market). Speaking of year-end targets, Reuters polled a number of US strategic analysts who estimate that for the rest of the second half of 2023 the S&P500 index will not be able to rise as massively as last year, and may even only have the potential to reach the 4496 level which is only about 13.5% left from the last closing position at 4436. As for JCI, the prospect of returning to the 7000s will only happen after the crucial resistance at 6950-6970 can be passed solidly. NHKSI RESEARCH thinks that the above mentioned resistance breakout attempts that have been made throughout this year still have further potential going forward, but still suggests that investors/traders should be very strict on their AVERAGE UP strategy; especially since yesterday’s candle became a Shooting Star-like shape (in the resistance area) which could be a sign of a potential trend reversal ahead. 

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