Today’s Outlook:

• US stocks rallied in trading on Friday (23/08/24) after dovish remarks from Federal Reserve Chairman, Jerome Powell, reinforced expectations that the central bank will cut interest rates soon in September. In highly anticipated comments from market participants before the Jackson Hole Economic Symposium opens, Powell said that the time has come to lower the benchmark interest rate, as the upside risks to inflation have diminished considerably. Powell also added that they do not see any further weakening in labor market conditions. This crucial speech thus almost ensures a rate cut at next month’s FOMC Meeting, which would be the first cut in over 4 years. Chief market strategists see this as the dovish turn that market participants have been waiting for. All three major US stock indices surged after Powell’s statement, with megacaps Nvidia, Apple, and Tesla providing the biggest boost. Small-cap stocks and regional banks also outperformed, rising 3.2% and 4.9% respectively; making the financial sector hit an all-time high, especially when the shadow of a US economic recession has faded. The Dow Jones Industrial Average rose 462.3 points, or 1.14%, to 41,175.08, the S&P 500 gained 1.15%, to 5,634.61 (close to an all-time record high), and the NASDAQ Composite surged 1.47%, to 17,877.79. All 11 major sectors in the S&P 500 ended the session in positive territory, with real estate stocks posting the largest percentage gain, up 2.0%.

• FIXED INCOME & CURRENCY: While stocks rallied, US Treasury & US Dollar yields weakened. The yield on the benchmark 10- year US Treasury note fell 5.9 basis points to 3.803%, from 3.862% late Thursday. The 2-year Treasury yield, which typically moves in line with interest rate expectations, fell 9.7 basis points to 3.9132%, from 4.01% late Thursday. Its equivalent in Germany German Bund stabilized at a yield of 2.226%. The Dollar Index turned weaker and sank to a 52-week low of 100.6, whereas the Pound sterling rose to its highest level in over 2 years on Friday. The Euro rose to USD 1.1189/+0.7% on the day, reaching a 1-year high. The Japanese Yen strengthened against the Dollar +1.36% to 144.27 following the Fed news and Bank of Japan Governor Ueda’s statement on interest rates. Data showed Japanese Core Inflation increased for the 3rd consecutive month, but a slowdown in demand-driven Inflation suggests there is no urgency for an immediate rate hike.

• ECONOMIC INDICATORS: Next week, the data-dependent Fed will have a range of economic indicators to consider before its September rate decision, including second quarter GDP revisions from the Commerce Department and the broad Personal Consumption Expenditures (PCE) report, which includes the PCE price index, the Fed’s preferred inflation benchmark. From the US today will be monitored the Durable Goods Orders (Jul) data which is forecast to have significant monthly growth, changing from negative to positive 4.0% mom.

• ASIA & EUROPE MARKETS: Europe’s STOXX 600 index rose about 0.5%, its highest level in more than three weeks and the third consecutive week of weekly gains. Asian stocks excluding Japan fell 0.1%, but Japan’s NIKKEI rose 0.4% as investors digested inflation data and remarks from Bank of Japan Governor Kazuo Ueda indicating readiness to raise interest rates if the economy and inflation match forecasts. This left MSCI’s worldwide index up about 1.1%, now slightly above its all-time peak in mid-July. In Europe, GERMANY in particular will today look forward to the German Ifo Business Climate Index (Aug) which will assess business climate expectations for the next 6 months, which is predicted to not fully stabilize strengthening.

• COMMODITIES: OIL prices jumped more than 2%, rebounding after earlier losses last week due to rising US crude stockpiles and again still about weakening demand prospects in China. GOLD prices rose about 1.1% to USD 2,510/ounce, close to the record high of USD 2,513 reached last Tuesday.

• JCI is in a period of determination whether it can break above the highest level in history, into the 7600s area. NHKSI RESEARCH tries to guess that today’s target is in the range of 7620-7660, before encountering the risk of a pullback since JCI is in a critical Resistance area, coupled with an RSI position that is approaching Overbought. However, considering the consistent foreign spending lately, for example in the last week Foreign Net Buy was recorded significantly at IDR 6.27 trillion,  o the point of reducing their YTD net sell position to only minus IDR 4.65 trillion (RG market) and IDR exchange rate comfortably below IDR 15500/USD, we think the bullish aura in the market can last until the end of the year. Therefore our BEST ADVISE is to use the future weakening momentum as an opportunity to Buy on  Weakness.

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