Today’s Outlook:
• Global stock indexes rose on Monday (23/09/24) after Federal Reserve officials stated that last week’s 50bps rate cut was appropriate; meanwhile the Euro weakened against the Dollar as business activity data in the Eurozone disappointed. US Treasury yields rose as bond investors continue to expect no imminent recession in the world’s largest economy. The Dow Jones Industrial Average rose 61.29 or 0.15%, to 42,124.65, the S&P 500 gained 0.28% (within 0.3% of its record high last week), and the Nasdaq Composite appreciated 0.14%. The Russell 2000 Index, which tracks small-cap stocks, fell 0.25%. MSCI’s global stock index rose 2.68 points, or 0.32%, to 840.05. The STOXX 600 European Index rose 0.4%.
• MARKET SENTIMENT: US policymakers’ comments were in the spotlight and sort of supported the market’s bullish aura after the Fed last week began its easing policy with a half-point rate cut. Three Fed Presidents from different states: Kashkari, Goolsbee, and Bostic agreed that last week’s decision was the right one to take and they expect many more rate cuts in the next year, as the US economy has approached normal Inflation & Unemployment levels. Fed Fund Rate futures have priced in a 54% chance of a smaller cut of 25 basis points at the November meeting, with a 46% chance of a larger easing of 50 basis points, according to the LSEG survey. For 2024, futures indicate a total cut of about 78 basis points. CITI GROUP strategists expect the Federal Reserve to cut interest rates by 50 basis points in November, a decision that will be heavily influenced by this Sept’s employment report.
• ECONOMIC INDICATORS: Economic data releases become increasingly important as stock valuations have climbed high.
— S&P Global showed the EUROZONE PMI contracted sharply this month as the bloc’s dominant services industry stagnated, while the decline in the manufacturing sector accelerated. In contrast, the US PMI stabilized in September, but average prices for goods and services rose at the fastest pace in 6 months, which may point to accelerating inflation in the coming months.
— What To Expect This Week: CB Consumer Confidence (tonight), final US GDP 2Q figure (expected to be close to the 3.0% preliminary figure), US Durable Goods Orders, and the main highlight: Personal Consumption Expenditure (PCE) price index on Friday.
• CURRENCY & FIXED INCOME:
— The DOLLAR INDEX (DXY), which measures the strength of the US Dollar against a basket of other world currencies including the YEN and EURO, rose 0.14% to 100.92. Against the Japanese Yen, the Dollar weakened 0.21% to 143.61.
— US TREASURY YIELD with a maturity of 7 to 30 years – earlier rose to the highest level in 3 weeks. This further widened the yield curve, which is a barometer of the US economic outlook, with the spread between 2- and 10-year yields reaching 17.9 basis points, the steepest since June 2022. The yield on the benchmark 10-year US Treasury note rose 2.3 basis points to 3.751%, from 3.728% at the end of Friday.
• COMMODITIES: After gaining 4% last week on the back of a large cut in US interest rates as well as signals of further borrowing cost cuts in the rest of the year, OIL prices slipped back after reading disappointing Eurozone business activity data. US WTI fell 63 cents to USD 70.37/barrel and BRENT fell 58 cents to USD 73.90. On the other hand, potential supply disruptions due to the MIDDLE EAST CONFLICT where there were Israeli airstrikes on Hezbollah – Lebanon targets on Monday supported oil prices. After nearly a year of war in Gaza, Israel has shifted its focus to the northern border, where Hezbollah is firing rockets in support of its ally, Hamas
– Iran. Concerns that Iran will become more involved, could increase the likelihood of oil exports being threatened.
• ASIAN MARKETS: Investors are debating whether global monetary easing may have started too late to stop the symptoms of recession. CHINA’S central bank finally cut its 14-day repo rate (while injecting liquidity) by 10 basis points, days after disappointing markets by not lowering long-term rates. BANK OF JAPAN is the only world central bank to raise rates, investors will be looking to Governor Kazuo Ueda’s speech on Tuesday for clues on the pace and extent of tightening. The BOJ left rates unchanged on Friday and signaled it was in no hurry to raise them again. But before the speech, market participants are looking forward to the Manufacturing & Services PMI (Sep) data due later this morning. Early this morning SOUTH KOREA has reported PPI which deflated 0.1% mom in Aug, thus on an annualized basis PPI fell to 1.6% yoy, from 2.6% previous period.
• EUROPEAN MARKETS: SWISS NATIONAL BANK meets on Thursday and the market is fully pricing in a quarter point rate cut to 1.0%, with a 41% chance of a 50 basis point easing. The GERMAN IFO BUSINESS CLIMATE INDEX (Sept) will be in the spotlight as yesterday’s Eurozone PMI figures came in disappointing, thus a pessimistic outlook is already predicted for the next 6 months of business expectations in Europe’s largest economy.
• JCI closed up 32.7pts / +0.42% to 7775.73 level, kept well above MA20 but not strong enough to break above MA10 / Resistance 7792 or 7800 level again. Inevitably this is enough to make market participants question whether further consolidation will still occur today even though on the one hand foreign spending is still consistently entering, this time amounting to IDR 1.01 trillion (RG market). The RUPIAH exchange rate position is also comfortably below IDR 15200 / USD. NHKSI RESEARCH considers that despite the market high volatility especially due to the chaotic BREN – FTSE RUSSELL issue, there may still be trading opportunities available if we are observant of sector rotation, but we still recommend to reduce buying positions from usual in anticipation of consolidation turmoil that could arise at any time.
Company News
• HRTA: Releases IDR 900M Bonds, with 6.75-7.75% Interest Rate
• PGEO: Strengthening Collaboration for Geothermal Development in Indonesia
• RAJA: Soaring 55%, RAJA Earns USD14.29 Million in Mid-2024
Domestic & Global News
Cigarette Excise Tax is Ensured Not to Increase Next Year, This is the Reason!
Samsung Invests IDR 27.36 Trillion in Vietnam, Builds OLED Display Factory
Download full report HERE.
