The US stocks gave up gains to close lower after comments by Federal Reserve Chair Jerome Powell, following the US Central Bank’s decision to raise interest rates by 25 bps (as expected) to 5%-5.25%, which is the highest level since 2007; and signalled that they could put brakes on the rate hike (rate pause) in June, although incoming data will still determine future decisions. The FOMC Meeting earlier today signalled the 10th consecutive hike since March 2022. The banking sector plunged on fears that higher interest rates would further hit the profitability of regional banks, exacerbated by the slump in technology stocks. Economic data on new private sector jobs showed significant growth above expectations, with ADP Nonfarm Employment Change (Apr.) coming in at 296k, doubled the previous period’s 142k and higher than the forecast of 148k. In addition, the S&P Global Composite PMI (Apr.) showed expansionary signs with a reading of 53.4, higher than the previous period of 52.3; similarly, the ISM Non-Manufacturing PMI also became more expansionary at 51.9, slightly higher than the previous of 51.2. Those data releases made investors dwell on the central bank’s comments that the path to the 2% Inflation target is still a long way to go, and therefore, it is likely that the natural interest rate will still be perched at around 5% for the rest of the year.

Meanwhile, JCI was still unable to bounce on the second day of trading in May, even had to close below a number of important supports such as MA10 & MA20, which supposed to keep the short term uptrend intact. Investors also factored in the risk of US banking sector health and were rather reticent ahead of the Federal Reserve’s interest rate decision; causing foreign to unwind some of their positions through a Net Sell of IDR 131.1 billion. A number of Asian market indexes also moved in the negative territory; Malaysia’s central bank raised their interest rate 25bps to 3%, the first hike since last November and pushed their borrowing cost to the highest level since 2019 as inflation risk looms. Oil prices continued to weaken after plunging 5% the day before despite the fact that US oil inventories dropped more than expected; as investors fear that the US economic turmoil will lead to a wave of (global) recession, thereby stabilizing world gold prices above the psychological level of USD 2000. NHKSI RESEARCH predicts that the recent consolidation of JCI still needs to find solid support around 6800, and must be able to quickly climb back above 6850 to save the bullish sentiment remains in the market. In the meantime, Indonesian capital market investors/traders are advised to hold all positions, while paying attention to the 1st quarter earnings releases that begin to appear, and focus more on buying stocks from issuers that are proven to have good fundamentals.

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