All three major Wall Street indexes ended lower in negative territory of less than 1% as latest US bank crisis threat emerged from PacWest Bancorp whose share price plunged 51% and dragged down other regional bank stocks. PacWest Bancorp confirmed it was exploring strategic options, including the possibility of having to sell its assets. The CBOE Volatility Index (or Wall Street’s fear gauge) rose to as much as 21 pts, its highest since late March. With investors increasingly worried a widening bank crisis and a looming recession, traders begin expects the Federal Reserve to cut interest rates at the July FOMC Meeting, as reported by the CME Group FedWatch Tool. Even though the Fed just raised interest rates by another 25 bps at the meeting on May 3, where Chairman Jerome Powell commented that it was too soon to say with certainty that this upward trend in interest rates was over as inflation remains failed to reach the 2% target. Meanwhile, US economic data reported Initial Jobless Claims rose to 242k, higher than the forecast and the previous period. On the other hand, the indicator of labor efficiency (excluding the agricultural sector) or Nonfarm Productivity 1Q23 also dropped to a minus 2.7% level, greater than the forecast & previous period; thus causing Unit Labor Costs 1Q23 to jump to a level of 6.3%, almost twice as high as the last quarter at 3.3%. More important labor data will be awaited this Friday evening, including Nonfarm Payrolls (Apr.) and Unemployment Rate (Apr.). Data from other parts of the world stated that the economic slowdown is still plaguing China, with the Caixin Manufacturing PMI (Apr.) reading surprisingly entering the contraction area of 49.5, lower than the forecast & previous period, which is still at the safe limit of 50. Meanwhile, the economic stretch even looks a little more vibrant in the European part of the world as the Composite PMI for Germany, Eurozone, and the UK in April looks more expansionary than the previous month. ECB announced a 25bps rate hike to 3.75%.

Indonesian investors will be waiting for the 1Q23 GDP reading this morning, where it is expected that 1st quarter economic growth will fall below the 5% level on an annual basis (4.95%) and contracted 1% on a quarterly basis. NHKSI RESEARCH considers it reasonable that consolidation has not yet departed from JCI. However, there was an attempt to rescue the position above one support yesterday but still not sure to secure JCI above the 6850 level. Wait & See, or Hold all positions is the best advice to apply at the end of this week.

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