Today’s Outlook:
• Disappointing US employment data on Friday fueled fears of a future recession, prompting investors to sell off heavily in the stock market and turn to safe-haven bonds. Bond prices surged, sending yields to multi-month lows. Oil prices fell more than 3%; while the Dollar Index fell more than 1% to its weakest position since March. US Tech companies took a significant hit, and the European bank stock index headed for its biggest weekly decline in 17 months on weak earnings reports. A measure of stock market volatility (VIX), dubbed Wall Street’s “fear index”, jumped more than 40%. All this panic-selling was caused by the release of the US NONFARM PAYROLL labor data on Friday which showed job growth in July (in the public sector) added only 114k, well below estimates of 176k and 179k in June. The Unemployment Rate also rose to 4.3%, indicating weakness in the labor market and the vulnerability of the economy in general to recession. Earlier the market was already reeling from disappointing performance reports from Amazon and Intel as well as a weaker-than-expected US factory activity survey on Thursday. On the one hand, the data raised expectations of multiple interest rate cuts by the Federal Reserve this year, which only at this week’s FOMC Meeting chose to keep the Fed Funds Rate unchanged. Analysts & economists are increasingly blaming the Federal Reserve for not cutting interest rates sooner, amid other central banks’ more bold moves to cut rates. As a result, the NASDAQ Composite fell 2.43% or 418 points to 16,776.16. The index has fallen more than 10% from its July peak, confirming that it is in a correction after concerns were raised about overpriced stock valuations amid an increasingly apparent economic slowdown. The Dow Jones Industrial Average slumped 610.71 points, or 1.51%, to below the 40k level to 39,737.26; while the S&P 500 plunged 100.12 points or 1.84%. The Fed has kept its benchmark interest rate at a 23-year high of 5.25%-5.50% for a year, and some analysts believe the world’s most influential central bank may have kept monetary policy tight for too long, risking a recession. Now money markets are immediately pricing in a 70% chance that the Fed, which is already 100% expected to cut rates in September, decides on a rate cut of 50 bps at next month’s FOMC Meeting.
• ASIA & EUROPE MARKETS: With sluggish summer trading likely to exacerbate the move, the sell-off started in Asia where Japan’s Nikkei shed 5.8%, its biggest daily decline since March 2020 during the COVID-19 crisis, as Europe and Wall Street are seen to be affected as well. MSCI’s index of stocks around the world fell 16.09 points, or 2.00%, to 787.31. Europe’s STOXX 600 fell nearly 3%, with the Financials and Technology sectors worst affected. Emerging market stocks fell 24.30 points, or 2.23%, to 1,063.50. MSCI’s index of Asia-Pacific shares excluding Japan closed down 2.48% to 553.72, while Japan’s Nikkei fell 2,216.63 points, or 5.81%, to 35,909.70.
• SECTOR ROTATION: Intel, a US chipmaker stock plummeted to more than 11-year lows and ended down more than 26%, after it suspended its dividend and announced massive layoffs alongside a disappointing revenue forecast. Artificial intelligence chipmaker Nvidia, one of the biggest contributors to the Tech sector rally, fell 1.8%; after rocketing over 700% since January 2023. It was now the turn of safe-haven assets to be bought as government bonds, gold, and currencies all rallied; as they are seen as assets that have the ability to hold their value in periods of market turmoil. The benchmark 10-year US Treasury yield fell 18 bps to 3.798%. The 2-year yield, which usually moves in line with interest rate expectations, fell 28.5 basis points to 3.8798%. In the foreign exchange market, the yen appreciated nearly 2%, extending its rapid rise after the Bank of Japan raised interest rates to levels not seen in 15 years.
• COMMODITIES: Nevertheless, spot GOLD is currently observed down 0.37% to USD 2,436.31/ounce and Gold futures closed 0.4% lower to USD 2,476.9/ounce. OIL prices also slipped more than 3% on global economic growth concerns, with benchmark BRENT futures in the European market closing down USD 2.71/3.41%, to USD 76.81/barrel. US WTI crude ended down USD 2.79/3.66%, at USD 73.52/barrel.
• ECONOMIC INDICATORS: This day will be filled with Composite & Services PMI (Jul) data from around the world, especially from JAPAN, CHINA, GERMANY, EUROZONE, & UK; and not to forget the evening data from the US. Domestically, INDONESIA awaits the 2Q GDP data which will contribute to the overall market sentiment.
• JCI was detected to gain 0.27% over the past week thanks to Foreign Net Buy of IDR 2.67 trillion (all market). Rupiah exchange rate closed at 16,195/USD on Friday even this morning has been observed at 16,019 which is the strongest point in the last 3 months (since May). The strengthening of Rupiah which is affected by the weakening of USD due to the concern of US economic recession / slowdown, opens the hope that Rupiah can see the level of 15,900-15,800 per USD in the near future, although this all still keeps USD in its uptrend for more than a year. NHKSI RESEARCH needs to remind the danger of a tsunami hit due to the regional market meltdown, especially when JCI is struggling to break the Resistance level of 7355-7375 for almost a month. Our best Advise: set your Trailing Stop, do not hesitate to reduce your position to avoid exposure to the sell-off that may spread to our market.
Company News
• CTRA: Soaring 32 Percent, June 2024 CTRA Posts IDR1.02 Trillion Profit
• INDY: 76 Percent Slump, INDY’s June 2024 Profit Remains USD21 Million
• HEXA: Hexindo’s Profit Falls 59.9 Percent in the First Half of 2024
Domestic & Global News
Rice Prices Soar Again, This is the Trigger!
Israel Bracing for Attack After Assassinations in Beirut and Tehran
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