All three major US indexes fell more than 1% on Tuesday (02/05/23) as regional bank shares tumbled on renewed fears over the financial system, following the news regarding JPMorgan’s purchase on First Republic Bank assets’; as investors tried to gauge how much raise the Federal Reserve may need for the interest rates at the FOMC Meeting decision, which can be seen early Thursday morning at 01.00 WIB. The Fed is expected to raise the Fed Fund Rate by 25 bps, and investors are anxious for any signals from the central bank on whether it will be the last hike for now, or there are still plans for further hikes considering their inflation rate is still far from the 2% target. Energy stocks also failed to help market sentiment as a potential default on US government debt haunted market interest. Treasury Secretary Janet Yellen said that the US government could shut down on June 1 if the debt ceiling increase is not immediately approved by the parliament. The S&P500 energy sector plunged 4.3%, while the financial sector also lost 2.3%. The Volatility Index closed at a 1-week high.
JCI began the first trading day of May 2023 with a drop of 52.41pts / -0.764% to 6863.3 after testing MA10 & MA20 Support at 6845-6820 area. Investors’ concerns regarding the ongoing banking crisis in the US outweighed the fact that Indonesia’s Inflation rate (Apr.) managed to ease back to 4.33% YoY (vs. 4.97% Mar.) despite the festive season of Ramadhan. Core Inflation also managed to ease to a 10-month low of 2.83% YoY (vs. 2.94% Mar.), which was also lower than expected. Meanwhile, the S&P Global Indonesia Manufacturing PMI (Apr.) expanded to 52.7 (vs. 51.9 previous month), signaling 20 consecutive months of growth in manufacturing activity. The Central Banks of South Korea and Indonesia signed a Memorandum of Understanding to work together to promote both parties’ currencies through bilateral transactions, such as in current account transactions and direct investment. This cooperation is expected to help businesses from both countries by reducing transaction costs and minimizing exposure to currency volatility risks. Elsewhere on the continent, the Reserve Bank of Australia decided to raise interest rates 25bps to 3.85%, dashing investors’ hopes of a rate cut on the 11th hike of the year. Considering the current market sentiment, NHKSI RESEARCH expects JCI to experience another consolidation session today to test the strength of the crucial Support level of 6845-6820; however, if the bullish is more victorious then investors shall watch the possibility of the critical Resistance level around 6950-6960 can be broken. Wait & See advice while waiting for the Fed’s interest rate decision to be announced in less than 24 hours seems the wisest to apply.
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