Today’s Outlook:
• The three major US stock indexes closed in negative territory again, extending the sluggish start to Q2, with the DJIA leading the fall by 1% on Tuesday (02/04/24) while the 10-year US Treasury yield touched a 4-month high after data showed strong labor demand, thus fueling fears that the Federal Reserve will delay interest rate cuts. The US Dollar also briefly touched a 4-month high before closing lower, as anticipation of the Japanese government to intervene in the Yen, limited the Dollar’s strength over the Sakura State currency. The Dollar Index which measures the USD’s strength over 6 other major world currencies, slipped 0.21%; while Gold recorded a new peak. US Treasury yields have actually started to rise on Monday since manufacturing data grew expansively above the 50 mark for the first time since Sept 2022 and last week’s PCE price index was revised higher for January as public spending boomed in February. US10YT touched a yield of 4.405%, the strongest since Nov 28. Meanwhile, the 2-year US Treasury Bond which is most reflective of interest rate expectations, fell 2.5bps to yield 4.693%. Two important US central bank officials again voiced that there is no need to cut interest rates if Inflation is still above the central bank’s target of 2%. CME FedWatch Tool survey tool stated that the current chance of a Fed Funds Rate cut in June is 62%, down from 70% probability a week ago. Labor data will be the focus of market participants this week, where the important March Nonfarm Payroll report will originally be released on Friday with an estimate of 205k new jobs in March, slowing from 275k in Feb, where the US economy is expected to land on a soft-landing condition (where Inflation is able to slope but the overall economy is not so negatively affected). In the series of labor reports, today is the turn of ADP Nonfarm Employment Change which is expected to provide a higher figure in March of 148k, compared to 140k in Feb. Also monitored will be manufacturing PMI figures from S&P Global and service PMI from ISM, complementing other statements from key Fed officials.
• US ECONOMIC DATA: JOLTs Job Openings which records labor demand aka job openings, actually rose by 8000 to 8.756 million in February, higher than January’s reading which was revised lower to 8.748 million; as reported by the US Department of Labor. Market participants are responding to the fact that the US economy is still fairly strong amidst an upward trend in interest rates that seems to have a difficult risk of going down in the near future. Adding to the negative sentiment, Tesla’s share price dropped 4.9% after news that quarterly car deliveries fell for the first time in 4 years and failed to meet Wall Street analysts’ estimates.
• EUROPEAN MARKETS: The STOXX 600 European stock index also closed down 0.8% at a 1-week low after hitting a record intraday high. EUROZONE manufacturing activity contracted at a steepening pace in March, as demand continued to weaken and GERMAN inflation flattened. The 10-year German sovereign bond fell 1.2 bps to a yield of 2.398%. Today will see broader Eurozone Inflation data, which will give an indication of when the European Central Bank will start cutting interest rates.
• ASIAN MARKETS: The Japanese Yen turned higher by 0.03% versus the Dollar at 151.57 after depreciating to 151.79. The Japanese government is now seeing the urgency to intervene in the Japanese Yen which has fallen to 151.975/USD in order to control the currency’s wild movements. In PMI week, JAPAN and CHINA will report their Services PMI today.
• COMMODITIES: Brent OIL prices briefly touched the USD 89/barrel level for the first time since October (before closing at USD 88.92/ barrel), as fresh threats to global oil supplies emerged from Ukraine’s latest attack on Russian energy facilities on Tuesday. GOLD hit fresh records as traders hunted for safe-haven assets in light of rising geopolitical tensions in the Middle East region, while ignoring the still-strong Dollar and faltering chances of a US interest rate cut. Spot gold prices touched USD 2276.89/ounce; while gold futures were 1.1% higher at USD 2281.8/ounce. Oil price appreciation was also helped by data on US crude oil inventories that fell more than expected, as reported by the American Petroleum Institute for the week ending March 29, falling by 2.3 million barrels (higher than the forecast of 2 million barrels) following the addition of 9.3 million barrels in the previous week. Today it is the US government’s turn to release weekly crude stockpile figures where it is expected to reduce by 2 million barrels.
• Yesterday’s JCI managed to close in positive territory at 7237 after wallowing back in the red zone, reversing a gain of 32 pts or 0.44%. NHKSI RESEARCH warned that this strengthening will not last long as regional sentiment is less favorable while Rupiah exchange rate position has not improved much at IDR 15882/USD. Our best advice is to maintain more of a WAIT & SEE attitude and use the strengthening momentum to reduce positions at better prices, it is good to consider reducing portfolio size in anticipation of the long Idul Fitri holiday.
Company News
• KLBF: Net Profit Slumped 18%
• MEDC: Recorded Net Profit of USD330.67 Million
• INDY: Accumulated Revenue of USD3.02 Billion
Domestic & Global News
• Additional EBT Power Plants Targeted to Reach 390 GW by 2060
• China is Now More Favored by Foreign Investors than India
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