Today’s Outlook:

• MSCI global stock indices fell on Thursday (30/05/24) along with bond yields, plus the US DOLLAR on the back of revised weaker-than-expected US 1Q GDP data; as investors digested Federal Reserve comments for clues on the outlook for interest rates and the US economy going forward. The US Commerce Department reported that the US economy grew slower than expected in the first quarter after a downward revision to consumer spending, leaving US GDP to grow at an annualized rate of 1.3% compared to the previous estimate of 1.6%. The DOLLAR INDEX weakened following the data after rising to a 2-week high the previous day; the US TREASURY YIELD also fell after rising 2 days in a row driven by weak government debt auctions. There are actually several views regarding this latest economic indicator; the initial reaction is that perhaps the market is hoping this is an opportunity for the Fed to cut interest rates now that the slowdown in the economy & consumption means less Inflationary pressures. On the other hand, fundamental investors may also see the economic slowdown as a drag on future corporate profit growth, and therefore negatively impacting the stock market. After the GDP data, investors anxiously await the April PCE price index report, the Fed’s preferred measure of inflation, due later tonight at 7.30pm GMT; followed by Personal Income & Spending (Apr) growth data which will prove the strength of consumer spending. The S&P500 was dragged down by a sell-off in the Technology index, triggered by a 20% plunge in Salesforce shares after they released a weak financial outlook.The Dow Jones Industrial Average fell 330.06 points, or 0.86%, to 38,111.48, while the S&P 500 lost 31.47 points, or 0.60%, to 5,235.48 and the NASDAQ Composite dropped 183.50 points, or 1.08%, ending the session at 16,737.08. MSCI’s worldwide stock index fell 3.22 points, or 0.41%, to 780.94. Some Fed officials said that while the timing of the rate cut remains unclear, they do not see a need to raise rates further. On the one hand, they need to see an improvement in unemployment as one of the factors that can reduce inflationary pressure by itself. The latest weekly INITIAL JOBLESS CLAIMS data showed unemployment claims in-line with expectations, increasing to 219k from 216 the previous week.
• ASIA & EUROPEAN MARKETS: The STOXX 600 index closed up 0.6% after falling sharply on Wednesday when data showed GERMAN INFLATION rose slightly higher than expected in May. EUROZONE reported April Unemployment Rate reduced to 6.4% from 6.5% the previous month.Sentiment in the Services & Industrial sectors showed improvement in May although the Consumer Confidence and Business & Services Climate Surveys are still struggling to show strength. Today investors are waiting for important data, namely the preliminary EUROZONE INFLATION (May) estimate to be announced around 16:00 GMT, with a forecast annual Inflation rate of 2.5% (from 2.4% previous period), and Core CPI still somewhat stuck around 2.7% yoy.
• From the Asian continent, Industrial Production in SOUTH KOREA actually grew significantly to a 3-month high of 6.1% yoy in April compared to 1.0% in the previous month. On the other hand, their Retail Sales dropped -1.2% mom in April, contrary to the previous positive growth of 1.1%. Meanwhile in JAPAN, this morning just reported Tokyo Core CPI increased as expected to 1.9% yoy, from 1.6% previous figure; helped by higher than expected Retail Sales (Apr). Amidst the unexpectedly sluggish Industrial Production growth to negative -0.1% mom, their April Unemployment Rate has not budged from 2.6%, the same as the previous month.From the neighboring Bamboo Curtain country, there will be a number of important data from CHINA published today: Composite PMI including Manufacturing & Non-Manufacturing (May), Construction Orders & Housing Starts (Apr).
• US TREASURY YIELD fell after the revised weaker 1Q GDP data maintained expectations for the Fed to start cutting interest rates this year. Yields on 2-year to 30-year US Treasuries all recorded their biggest daily declines in 2 weeks after peaking at a 4-week high on Wednesday, following a weaker-than-expected government bond auction. The benchmark 10-year US Treasury yield fell 7.6 basis points to 4.548%, from 4.624% at the end of Wednesday. Meanwhile, the 30-year US Treasury yield fell 6.3 basis points to 4.6814% from 4.744%. The 2-year U.S. Treasury yield, which typically moves with interest rate expectations, fell 5.6 basis points to 4.929%, from 4.985%.
• CURRENCY: The DOLLAR INDEX, which measures the greenback’s strength against a basket of other major currencies including the Yen and Euro, was down 0.34% at 104.77, with the Euro gaining 0.26% at USD 1.0828. Against the Japanese Yen, the USD was 0.47% weaker at 156.86.
• COMMODITIES: OIL prices fell for the second day in a row after the US government reported weak fuel demand and a sudden surge in gasoline and distillate stocks. US WTI was down 1.67% at USD 77.91/barrel and BRENT was down 2.08% at USD 81.86/barrel. GOLD prices in the spot market added 0.13% to USD 2,341.94/ounce, supported by USD weakness & bond yields.
• JCI finally supported testing the late April low around 7020 and even breached below 7000 for a brief moment (Low: 6987) although eventually bounced back and closed with a long-leg Hammer-like candle; followed by RSI positive divergence. Although there are indications of LIMITED DOWNSIDE POTENTIAL around this psychological level of 7000, NHKSI RESEARCH would rather remind investors/traders to maintain caution at the end of the week, and prefer not to do much positioning considering the unfavorable market sentiment. Foreign net sell still continues with yesterday’s net sell of IDR 1.18 trillion (all markets), making this month’s short position quite massive, nearing IDR 16 trillion.

Company News

• BREN: Approved to Distribute Dividends of USD49.6 Million
• CGAS: Agreed to Distribute IDR2.2M Dividend
• AMAR: Distribute IDR55 Billion Dividend

Domestic & Global News
Indonesia’s Balance of Payments Slumped in the First Quarter of 2024, Entrepreneurs Reveal the
Chinese Cars Getting Cheaper? Yuan Rate Slips Further Against Dollar and Other Currencies

Download full report HERE.