Today’s Outlook:

• Wall Street’s major indexes closed in negative territory again, after the S&P 500 reversed early session gains as a slump in Super Micro Computer’s share price pressured other chip stocks and weighed on the broader market. The Dow Jones Industrial Average fell 234 points, or 0.60%, the S&P 500 dropped 0.7%, and the NASDAQ Composite plunged 1% as Super Micro Computer shares fell 20% after the data center operator’s Q2 results fell below expectations, raising concerns about how much demand there really is in the AI industry.

• JPMORGAN & CHASE: JPMorgan Chase & Co. quantitative strategists warned that global equity prices could still fall further following the recent sell-off, as global equity allocation is currently well above its post-2015 average level, currently at 46.5%. Moreover, a further correction would not only be caused by falling equity prices but also a surge in allocations to bonds, as the looming recession threat makes relatively safer assets more sought after. According to JPMorgan’s calculations, for equity allocations to return to this average level, equity prices would need to fall another 8% from where they currently stand.

• CITI: Citi strategists mentioned in a Wednesday note that the earnings resilience of the S&P 500 remains intact despite rising recession fears and the recent sell-off. The Citi Economic Data Change index, which summarizes US macro data trends, indicates a further deterioration in the US economy. But interestingly, despite weak economic data in 2022, S&P 500 earnings growth was able to stay relatively flat. In 2024, the strategists are confident enough to set an EPS forecast of USD 250 for the S&P 500, slightly higher than the current consensus of around USD 243 and still a significant improvement over the 2023 performance. They also foresee bigger problems for earnings in 2025 if a more pronounced macro slowdown continues for the rest of the year.

• GOLDMAN SACHS: Goldman Sachs noted that the Financial Stress Index (FSI) has strengthened significantly over the past 2 days but is still within historically normal levels. They claim the FSI has not shown any serious market disruptions that should force policymakers to intervene.

• FIXED INCOME: The US government sold USD 42 billion worth of 10-year government bonds on Wednesday at a higher yield than expected as demand declined. The bonds gave a 3.960% yield, 3.1 bps above the expected yield, or the at-issue rate of 3.929%, but below the highest 4.276% yield seen in the previous auction. The weak auction pushed US government bond yields higher, with the 10-year bond trading at a yield of 3.951%, up 6bps.

• ECONOMIC INDICATORS: Not much economic data to look forward to; as usual, every Thursday the weekly Initial Jobless Claims figure will be monitored where this time it is predicted that there will be 241k jobless claims in the latest week, compared to the surprising 249k in the previous week.

• ASIA & EUROPE MARKETS: CHINA posted higher growth in Imports than their Exports which appeared to weaken in July. Meanwhile, INDONESIA reported July Foreign Exchange Reserves at USD 145.4bn, managing to move higher from the previous month at USD 140.2bn. The amount was the largest since last December, supported by the government’s global sukuk issuance as well as tax and service revenues.

• COMMODITIES: Energy stocks led the market higher, supported by a surge in OIL prices after data showed US crude stockpiles fell more than expected in the week ended August 2. The Energy Information Agency (EIA) reported on Wednesday that US crude stockpiles fell by 3.7 million barrels in the week to August 2, compared with estimates of a decline of just 1.6 million barrels. US WTI managed to crawl up to USD 75.36/barrel, bouncing back from a low of USD 71.7 earlier in the week that was rocked by recession fears.

• JCI mimicked the movement of EIDO which rallied significantly above 1% the previous night in the US financial market, so yesterday JCI posted a gain of 1.16% / 83pts supported by Foreign Net Buy of IDR 341.09 billion; where the intraday high point touched 7245 level which happened to be the location of MA10 which acted as the first Resistance. NHKSI RESEARCH considers that the failure to close above the Resistance does not rule out the possibility that JCI consolidation could still continue today, especially if overshadowed by less conducive sentiment from regional markets. Therefore, the same advice as the previous days which is to choose fast trading and strict money management will still be applied.

Company News
• MARK: Mark Dynamics Distributes IDR 76M Interim Dividend
• SCMA: Soaring 372 Percent, SCMA Recorded IDR 327 Billion Profit in 1H24
• RAAM: Tripar Multivision (RAAM) Plans to Private Placement 619.4 Million Shares

Domestic & Global News
Ministry of Cooperatives and SMEs Wary of Chinese Platform Temu Disrupting Local MSMEs
UK, Egypt Issue Alerts for Iran, Lebanon Airspace as Risks of Military Conflict Rise

Download full report HERE.