Today’s Outlook:

• The US stock market started the week with a strong move on Monday (06/05/24) on the back of renewed hopes of a Federal Reserve interest rate cut in September. The benchmark S&P 500 rose 1%, the Tech-dominated NASDAQ gained 1.2%, and the 30- stock Dow Jones Industrial Average gained 176 points or 0.5%. Expectations of a September rate cut resurfaced after lower-than-expected Nonfarm Payrolls data released on Friday signaled a slowdown in the labor market, thereby easing concerns about wage growth-fueled inflation. Investors are now factoring in the likelihood that the US central bank will start cutting interest rates as soon as September with a probability of around 44%, according to the CME Group Fedwatch Tool; compared to previous estimates that expected the first pivot to occur in November. A number of Federal Reserve officials, who are scheduled to give statements this week, acknowledged that there has been a slowdown in employment growth which will increase the likelihood of a rate cut by the Fed as their next monetary policy move.
• ISRAEL – HAMAS WAR: Uncertainty surrounds Gaza War ceasefire discussions as Israel reportedly shows disapproval of a softer deal. Hamas reportedly accepted the terms of a ceasefire deal mediated by Egypt and Qatar, but Israeli officials told Reuters it was a softer version of an earlier Egyptian proposal. The Israeli official also told Reuters that Hamas’ announcement “appears to be a ruse to portray Israel as rejecting the deal” because the deal includes outcomes that it does not agree with, raising uncertainty over whether Israel would be willing to agree to a deal to temporarily end the months-long war in Gaza.
• EARNINGS SENTIMENT: Warren Buffett’s Berkshire Hathaway B rose 1% after reporting quarterly results at the weekend that reported a 40% jump in Q1 operating profit from a year earlier. Super Micro Computer Inc and Micron Technology Inc rose more than 6% and 4% respectively, helping to lift the overall semiconductor sector.
• COMMODITIES: On Monday, OIL prices closed higher after swinging wildly on diminishing hopes of ending the war in Gaza as Israeli Prime Minister, Benjamin Netanyahu, reportedly said that the deal accepted by Hamas fell far short of meeting Israel’s demands. US West Texas Intermediate (WTI) crude oil futures rose 0.5% to close at USD 78.48/barrel, after dipping below USD 78/barrel in intraday trading. Meanwhile, BRENT futures rose 0.5% to USD 83.33/barrel. Israeli Prime Minister Benjamin Netanyahu said that the deal mediated by Egypt and Qatar was “far from meeting Israel’s demands,” clouding hopes of a ceasefire in Gaza. Hopes of a ceasefire had risen earlier in the day after Hamas said it accepted the deal proposal. The statement from Netanyahu came just as the Israeli Army began an offensive raid in Rafah. Signs that a ceasefire deal may not be reached as quickly as expected, led traders to cut their bets on easing geopolitical tensions in the Middle East which had led to a supply risk premium on oil prices. The decline in oil prices was also muted by the new factor of an interest rate cut by the Federal Reserve in September. An earlier than expected interest rate cut could help keep economic growth steady, supporting global demand for oil prices. Saudi Arabia announced that it would increase the official selling price for its crude oil to Northwest Europe, the Mediterranean, and Asia in June; the third consecutive monthly increase, indicating optimism for demand during the summer.
• ASIA & EUROPE MARKETS: CHINA released their Caixin Services PMI in-line with expectations at 52.5 in April, still holding in expansionary territory; similarly the Composite PMI and Services PMI for GERMANY & EUROZONE. The Eurozone also reported Inflation rates in their producer sector which remained in deflationary territory at -7.8% yoy in March, the pace of price declines slowing slightly from -8.5% in the previous month. As for today, market participants will keep an eye on the Service sector PMI report in Japan, housing prices in the UK, Factory Orders (Mar.) in Germany, and a number of Construction PMI (Apr.) in the European region; as well as Retail Sales (Mar.) in the Eurozone.
• INDONESIA: GDP grew by 5.11% yoy in the first quarter of 2024 supported by public & government spending. This was higher than the market forecast of 5.0% and after an increase of 5.04% in the fourth quarter of 2023. This was the fastest economic growth since the second quarter of 2023. While on a quarterly basis GDP shrank by 0.83% qoq, compared to the market forecast of 0.89% decline and after 0.45% growth in the previous quarter, was the first quarterly contraction in four quarters. The good news above closed the JCI in positive territory, although it only slightly strengthened 1.17 points to 7135.89 still followed by a significant foreign net sell of IDR 1.18 trillion. The Rupiah exchange rate strengthened 69 points to IDR 16025/USD. NHKSI RESEARCH considers that the strengthening of JCI cannot be said to prop it steadily above Support, even more important is to monitor JCI’s ability to break the nearest Resistance of 7170 which will slightly secure it from the threat of further landslide.

Company News

• WIIM: IDR90 Billion Profit
• ERAA: 1Q24 Revenue Reached IDR16.64 T
• KLBF: IDR957 Billion Profit

Domestic & Global News
• Bappenas Opens Up about Prabowo’s Free Lunch Program in the 2025 RKP
• Gaza Ceasefire Uncertain, Israel Vows to Continue Rafah Operation

Download full report HERE.