• Wall Street’s three major stock exchanges closed in negative territory on Tuesday (05/09/23), as they began the trading week after the Labor Day holiday, with the Dow Jones leading the way down 0.56% triggered by rising US Treasury yields along with Crude Oil prices; as well as investors assessed prospects for the Federal Reserve’s interest rate path.

• U.S. Treasury yields rose after economic data showed resilience and one Fed Official said it suggests that the central bank need not change the benchmark interest rates from its current position of 5.25%-5.50%. With the recent rally in Oil prices, it could block the path of US Inflation towards the 2% target. However, traders are still pricing in a 93% chance that the Fed Funds Rate will be left where it is at this September’s FOMC Meeting, while the chance of rates being held flat again in November stands at 54%, as reported by CME Group FedWatch. Goldman Sachs sees a 15% probability that the US will fall into recession within 12 months, down from its previous estimate of 20%.

• The Energy sector posted the best performance out of 11 S&P500 sectors, closing up 0.5% after Crude Oil prices hit their highest level since November 2022. Saudi Arabia & Russia who are members of OPEC+ announced to extend their production cut period until the end of the year, sparking fears of a world oil supply deficit of 1.5 million barrels per day in the fourth quarter of 2023 which will welcome the winter season. West Texas Intermediate (WTI) crude oil prices for October delivery rose 1.3% to USD86.69/barrel, a 7-month high. As noted, both Brent and WTI prices have climbed 20% since the end of June. Coal prices also surged on the back of several  sentiments, ranging from the Indian government’s decision to ask power producers about importing 4% of their coal needs, an increase in the level of coal-fired power plants in Europe, gas prices creeping back up to mine closures and production cuts in China.

• As expected, PMI figures in Europe are still struggling in contractionary territory, especially for France, Germany, the Eurozone and the UK. The Eurozone released PPI (July) as expected at -7.6%, widening deflation from the previous month’s -3.4%. While the US published Factory Orders which also dropped -2.1% in July, compared to June which still recorded positive growth of 2.3%. Today will see the US Trade Balance figures for July as well as their Export & Import conditions. S&P Global’s Services PMI and ISM Non-Manufacturing PMI both for August will also shed light on whether there is still growth in the US services and non manufacturing sectors.

• JCI made another attempt to break the psychological level of 7000, and even recorded a higher position at 7012. However, the key determinant is the 7000 itself, which if broken will free JCI’s way to the initial target of around 7100s. NHKSI RESEARCH suggests that it is better to Wait & See to see where the market interest goes, before adding to the overall portfolio position. However, trading opportunities are still wide open especially in sectors that are being hit by positive sentiment / news-driven. 

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