Today’s Outlook:
• The US Stock Market closed mixed on Wednesday (04/09/24), supported by gains in the Consumer Goods, Utilities, and Financials sectors, while losses in the Oil & Gas, Telecommunications, and Basic Materials sectors kept all three major indices relatively flat with the Dow Jones Industrial Average up 0.09%, while the S&P 500 fell 0.16%, and the NASDAQ Composite depreciated 0.31%. The market was driven by the sentiment of the JOLTS JOB OPENINGS report which explained that job openings fell more than expected in July to 7.67 million from 7.91 million (which was revised down) in June, also lower than 8.09 million expected by economists. pushing the ratio of job openings to unemployment to 1.07 to 1, below the pre-pandemic level. The report further validates the idea that the labor market is not only looser than before the pandemic but has continued to flatten and is now potentially at a faster pace of decline, Citi concluded. Market participants are increasingly nervous ahead of Friday’s US Nonfarm Payroll (Aug), (where it is forecast that the economy added 164k jobs in Aug) which is expected to play an important role in the Federal Reserve’s decision on whether to implement an interest rate cut of 25 basis points, or 50 bps, at the FOMC MEETING on September 18. The probability of a 50 basis points (bps) pivot has increased significantly in recent days, according to a survey of CME Group 30-Day Fed Fund Rate futures contracts. The probability of a target rate cut from the current rate of 5.25 – 5.50% to 4.75 – 5.00% now stands at 48%, a significant increase from the previous day’s probability of 42% and last week’s probability of only 36%. Meanwhile, the potential for a 25 bps rate cut from the current rate has decreased. The current probability of a 25 bps rate cut now stands at 52%, down from the previous day’s probability of 58% and last week’s probability of 64%. The 2-year US government bond, which is sensitive to Fed policy, fell more than 12 basis points to 3.766% after job openings fell more than expected. Another report that similarly implied a slowdown in the US economy was the Federal Reserve’s Beige Book released on Wednesday, stating that economic activity slowed in more districts pressured by weaker consumer spending and manufacturing activity.
• ASIAN MARKETS: Investors in Asia are bracing for a wave of top-tier economic data releases on Thursday, as they continue to digest this week’s market turbulence triggered by fears that the expected ‘soft landing’ of the US economy could end in something much worse. The JOLTS JOB OPENINGS figure falling to a 3.5-year low was interpreted as another signal for investors to sell stocks, buy bonds and position themselves for a bigger US interest rate cut. BofA Securities stated that their clients became net sellers of US stocks in the last week of August, where an outflow of USD 8.0 billion was recorded with the most selling in the Technology sector, marking the largest weekly exodus since late 2020 amid economic uncertainty. This was the second consecutive week of net selling, with clients selling single stocks and exchange-traded funds (ETFs). The outflows affected large-, mid- and small-cap stocks, BofA noted on Wednesday. The Fed’s total monetary policy easing is expected to reach 225 bps by the end of next year. That is the level of policy easing historically consistent with recessions. For Asian and emerging markets, falling US yields and a weakening dollar are often positive signals. But not so if they reflect a potential future recession. Signs of a slowdown are increasing. The 2-year US TREASURY yield hit its lowest point since May last year, BRENT crude oil hit its lowest point this year and fell 8% this week, and the 10-year CHINA bond yield is back near its latest record low. On the Asian currency front: MALAYSIA’S RINGGIT has in recent weeks been named the best performing Asian currency this year. This has helped control inflation, and with global volatility rising and the Fed set to cut US interest rates, the MYR could stay up for longer. The Malaysian central bank’s interest rate decision, along with the release of South Korea’s GDP (Q2, revised) will grab the attention of market participants today. Another Asian currency that gained was the JAPANESE YEN, on the back of the closing of Yen carry-trade positions and the currency fulfilling its traditional role as a safe haven for investors in difficult times. The Yen gained around 1% against the Dollar for a second day on Wednesday, and could enter a new stronger trading range.
• JCI is still able to maintain its closing position above the uptrend support: MA10 which currently stands at 7618; a number that will be tested if investors’ nervousness starts to increase in response to the sluggish US labor data. Foreign buying flows are still coming in consistently at IDR 151.62bn, leaving YTD Net Sell position narrowing to IDR 270.63bn. RUPIAH which is still comfortably below 15500/USD faithfully provides a positive buffer to the equity market. NHKSI RESEARCH reminds investors/ traders that while trading opportunities are still available in the market, keep an eye on sector rotation and continue to apply Trailing Stop due to the uncertainty of regional market index position, especially in this week which contains many sensitive
economic data.
Company News
• GOTO: Close Operations in Vietnam Starting September 16, 2024
• MHKI: MHKI and DLH Nganjuk Socialize Industrial Hazardous Waste Management
• MEDC: Medco Energi Lends Subsidiary IDR 25M, with 8.95%
Domestic & Global News
Causing Unconducive Industry, Food and Beverage Entrepreneurs Ask for Health Regulation to be Revised
Sweden’s Volvo Cars Scraps Plan to Sell Only Electric Vehicles by 2030
Download full report HERE.
