Today’s Outlook:

• Global stock markets were hit by heavy losses worldwide on Monday as Wall Street added to its string of market collapses (which was started by Japan’s Nikkei) by plummeting 1,033.99 points / -2.60% to 38,703.27, while the S&P 500 lost 3.00%, and the Nasdaq Composite shed 3.43%, to 16,200.08. MSCI’s index of worldwide stocks dropped 3.25% to 761.63 making it the biggest daily percentage decline since September 2022. The STOXX 600 Europe Index earlier closed down 2.17%. The CBOE Volatility Index, known as Wall Street’s fear gauge, recorded its highest intraday spike before ending the day at 38.57 points for its highest close since October 2020.

• Before the US stock market opened, JAPAN’s NIKKEI index closed down 12.40% which was the biggest daily decline since October 1987 as the Yen surged after the central bank again raised interest rates to levels not seen in 15 years. The yen rallied sha rply against the US dollar on Monday on aggressive unwinding of the so-called carry-trade, in which investors borrow money from low-interest rate countries like Japan to fund investments in higher-yielding assets elsewhere. But now the Japanese Yen is turning stronger and the US Dollar is weakening, also forcing investors to take-profit on stocks of large Tech companies that have posted high profits. The weaker-than-expected US Nonfarm Payrolls (Jul) report had kick-started the sell-off on Wall Street on Friday as investors priced in the possibility of a 50bps rate cut. The labor data was released following disappointing earnings reports from several large US Tech companies, further adding to the negative sentiment in the market. Goldman Sachs urged a faster rate cut, and there was talk of an emergency meeting of the Fed to realize a rate cut even before the September FOMC Meeting.

• ECONOMIC INDICATORS: The Institute for Supply Management (ISM) said that service sector activity in the US recovered from a 4- year low in July with rising orders and employment, slightly easing fears of a recession. The Non-Manufacturing PMI rose to 51.4 from 48.8 in June, exceeding economists’ expectations for 51.0. A PMI reading above 50 indicates expansionary growth in the services sector, which accounts for more than two-thirds of the US economy. CURRENCY & FIXED INCOME: THE US DOLLAR fell against the YEN to a 7-month low as nervous investors looked for signs of a recession in the United States. The DOLLAR INDEX (DXY), which measures the greenback against a basket of currencies including the yen and euro, fell 0.46% to 102.68. On the one hand, the US TREASURY YIELD rallied again after a solid US services sector activity report eased recession fears, after falling to its lowest level in more than a year earlier in the session. Chicago Federal Reserve President Austan Goolsbee also boosted sentiment when he said Friday’s weak July labor report did not necessarily signal a recession. The yield on the 10-year US Treasury note fell 1.1 basis points to 3.785%, from 3.796% on Friday, while the yield on the 30-year note fell 3.5 basis points to 4.0763%. The yield on the 2 year bond, which usually moves in line with interest rate expectations, rose 3 basis points to 3.9017%, from 3.872% at the end of Friday. The market’s reluctance to take risks was also seen in tighter spreads on US interest rate swaps, futures contracts on the Secured Overnight Financing Rate (SOFR) and the Federal funds rate as US bond spreads surged.

• COMMODITIES: In terms of commodities, Oil prices still closed lower on Monday, as recession fears led to concerns about overall demand, but these declines were tempered by the potential that an escalation of Middle East conflict could disrupt crude oil supply. US WTI closed down 0.79% at USD 72.94/barrel and BRENT closed at USD 76.30/barrel, or 0.66% lower yesterday. In precious metals, the funny thing is that GOLD seems to be losing its appeal as a safe haven asset. Gold spot price fell 1.52% to USD 2,406.16/ounce. US Gold futures also slipped down 0.74% to $2,407.70/ounce.

• ASIA & EUROPE MARKETS: a string of PMI data emerged yesterday, starting with JAPAN & CHINA recording Services sector growth remaining in expansionary territory for July; and most European countries such as GERMANY, EUROZONE, and UK also showed positive growth in both overall PMI and Non-manufacturing sectors. This morning Japan has released its latest economic data, Household Spending which appears to have fallen more than expected, although on the one hand employee Wage growth in June more than doubled the previous month.

• INDONESIA: reported Q2 GDP at 5.05% yoy, beating expectations of 5.0%, although slightly down from 5.11% in the previous quarter. On quarterly basis, the economy grew by 3.79%, better than expectation of 3.71% which was also higher than the previous quarter which was minus 0.83%; driven by mobility and consumption during religious festivities, increased public activities, and smooth election. As reminded, JCI was also hit by a market tsunami with a 3.4% decline in yesterday’s trading and touched a low of 7000 to test the psychological level. In this sell-off, foreigners were recorded to have sold net worth IDR 508.02 billion (all market). The Rupiah exchange rate stood at IDR 16180/USD. NHKSI RESEARCH again reminded investors/traders to step aside and wait & see while waiting for this storm to fade, while monitoring the next monetary policy move from the US central bank which is expected to calm market sentiment in general.

Company News
• NISP: It’s official! OCBC NISP Approves Merger with Commonwealth Bank (PTBC)
• BKSL: Skyrocketing 135 Percent, BKSL Recorded IDR 73 Billion Profit in the 1H24
• ADMR: Adaro Minerals (ADMR) Recorded Coal Sales Volume Up 43% in 1H24

Domestic & Global News
Sri Mulyani Ensures IDR 71 Trillion Free Lunch Budget to be Included in 2025 State Budget
US Personnel Wounded in Attack Against Base in Iraq, Officials Say

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