Today’s Outlook:
• The US stock market closed in red territory after a volatile session on Monday (04/11/24), as investors prepared for a crucial week in which Americans will elect a new president and the Federal Reserve will announce its interest rate decision. Presidential candidates DONALD TRUMP and KAMALA HARRIS both struggled to gain the upper hand in the final day of a very tight race. The Dow Jones Industrial Average fell 257.59 points, or 0.61%, to 41,794.60, the S&P 500 lost 0.28%, and the Nasdaq Composite depreciated 0.33%. The Russell 2000 rose 0.4% as falling yields supported small-cap stocks, which are considered more likely to benefit from lower interest rates. The CBOE VOLATILITY index, also known as the “fear gauge” index on Wall Street, edged up to 21.94 and remained above its long-term average of 19.46 as it neared the nearly 2- month high reached last week of 23.42. The sector that posted the biggest gain among the 11 major S&P sectors was Energy, up 1.87% on the back of stronger oil prices after OPEC+ decided to postpone plans to increase production. The market is already pricing in a near 100% chance that the Fed will cut the FED FUND RATE by 25 bps at the FOMC MEETING on Nov 7-8, with the CME FedWatch Tool survey showing a 98% chance of that, and a 2% chance of the US central bank keeping rates on hold.
• THE US PRESIDENTIAL ELECTION EFFECT: Predictions of a Trump victory gave rise to what the market called “Trump Trades” which drove up the US DOLLAR & US TREASURY YIELD as it was expected that his administration would come up with policies that would reignite Inflation; however after recent polls showed Harris, the Democratic vice presidential nominee, ahead in critical Iowa, it immediately triggered a decline in the USD & US bond yields. Analysts believe Trump’s policies around immigration, tax cuts, and the imposition of import tariffs could reignite Inflation, bond yields, and the US Dollar; while Harris is seen as the candidate to succeed the current policies. Analysts also indicated that the outcome could have a significant impact on market performance, especially the Big Tech sector which has been supporting the Wall Street rally. In particular, according to Wedbush analysts, a potential Trump victory raises concerns among global tech investors in expectation of an escalation of the US-China tech conflict and increased tariffs. Major changes in tariffs and a tougher stance towards China are believed to have a significant impact on NVIDIA’s semi-conductor chip supply chain, as well as Beijing’s retaliatory impact on Apple/Tesla, and slowing the pace of the AI Revolution.
• ECONOMIC INDICATORS: US Factory Orders (Sept) turned out to be a bigger drop than expected. Today investors will monitor US Trade Balance data as well as their Export-Import growth; not forgetting Composite & Services PMI data from both S&P GLOBAL and ISM.
• FIXED INCOME & CURRENCY: The benchmark 10-year US TREASURY YIELD was last down 6.4 bps at 4.299%, after initially falling as much as 10 bps. The 2-year US Treasury yield fell for the first time in 6 days, dropping 2.8bps to 4.1743%. Volatile trading is expected until the US presidential election results are out and investors are clearer on monetary policy. The 10-year yield had fallen for 5 consecutive months before surging about 48 bps in October. MSCI global stock indices ended flat, while the DOLLAR INDEX (DXY), which measures the greenback’s strength against a basket of currencies, was also unchanged at 103.86.
• EUROPEAN & ASIAN MARKETS: European stocks fell 0.3%, despite gains in the Energy sector following OPEC+’s decision to postpone plans to increase production which pushed oil prices up. Manufacturing PMI in GERMANY & EUROZONE improved in Oct, even better than expected (though still below the 50 expansion mark). Later this afternoon the UK will announce their Services activity growth & Composite PMI for Oct.
• – CHINA’S National People’s Congress standing committee meetings this week are of key interest to investors. The NPC opens meetings from Monday to Friday, and further details on a series of recently announced stimulus measures are in focus. China’s top stock rose 1.4%, with the Shanghai Composite Index gaining 1.2%. Reuters reported that at the NPC meeting, China considered approving the issuance of more than 10 trillion yuan ($1.4 trillion) in additional debt in the next few years to revive its fragile economy, a fiscal package that is expected to be further strengthened if Trump wins the election. China this morning will also monitor their CAIXIN Services PMI figures for Oct.
• – The BANK OF ENGLAND, which meets on Thursday, is also expected to cut rates by 25 bps. The decision has been complicated by the sell-off in government bonds following last week’s Labor government budget. Sterling rose 0.3% to $1.295, helped by a weaker dollar. Sterling fell 0.3% last week.
• COMMODITIES: OIL prices rose after OPEC+ announced its intention to postpone a planned production increase in December for one month. BRENT oil futures returned up 2.7% to USD 75.08/barrel. US WTI crude oil gained 2.95% to USD 71.54.
• JCI closed red at 7479.50 after trimming Monday’s decline to just 25.75pts / -0.34%. It seems that investors were somewhat affected by the market sentiment surrounding the US ELECTION & THE FED’s interest rate decision, in their decision to secure (some) profits & capital. The Closing position still saved JCI from confirming the formation of (bearish reversal) DOUBLE TOP pattern with important Neckline around 7450. NHKSI RESEARCH must warn that a break of that critical Support level will bring JCI to consolidate deeper towards 7400-7350, or worst case is to land in the 7000s again. Q3 FINANCIAL REPORT season will still shape domestic market interest, while closely monitoring regional market sentiment.
Company News
• BUDI & TBLA: Issuers of Sungai Budi Group to Distribute Interim Dividends Totaling IDR 233.38 Billion
• ASRI: 3Q24, Alam Sutera’s Profit Slumped 93.99 Percent
• MLPL: Minimalist Growth, This is MLPL’s Profit Performance in the Third Quarter of 2024
Domestic & Global News
Sri Mulyani Signs the Imposition of Antidumping Import Duty on Iron from China
China urges palatable EV trade solution from EU as France defends bloc
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