Today’s Outlook:
• Global stock indexes rallied to a new record high on Thursday (07/03/24), while government bond yields fell after the European Central Bank held interest rates in place, and Federal Reserve Chairman Jerome Powell reiterated that a rate cut this year is possible if inflation is safely contained. The 10-year US TREASURY YIELD hit a 1-month low ahead of the release of the Nonfarm Payroll (Feb) employment report this Friday, which will be of interest as to whether the Fed has successfully delivered on its mandate of controlling Inflation and maintaining high employment opportunities. In the US, the S&P500 surged 1% to an all-time closing high while the NASDAQ led all three indices’ gains by rising 1.51%, briefly rallying to an intraday record before easing slightly to close at 16,273.38; largely supported by the Technology sector based on investors’ optimism regarding the prospects of this year’s pivot and AI-related chips. Powell and several Fed officials are increasingly of one voice with statements that a rate cut this year is quite feasible if the economy moves as expected and Inflation stabilizes to decline. The yield on 10-year US Treasury bonds continued to slide during the week to a 1-month low before stabilizing slightly. The yield was last down 1.7 basis points from Wednesday night’s 4.087%, and followed a similar drop in German bond yields. European sovereign bond prices, which trade inversely to yields, jumped on the news, pushing the 2-year US Treasury yield down 4 bps to 4.52%. ECONOMIC DATA from the latest US Department of Labor said the number of Americans filing jobless claims was unchanged at 217,000 as the labor market continues to slacken but is still fairly solid.
• EUROPEAN MARKETS: Though ECB still kept interest rate at record high level, ECB President Christine Lagarde said that Inflation is cooling faster than anticipated a few months ago; but they need to monitor further to be convinced that the Inflation trajectory is stabilizing towards the target. The statement, which echoed the US central bank, sent European indices to record highs with gains of around 1%. Today will be monitored Eurozone GDP figures for the 4th quarter which are expected to strengthen slightly and move away from recession territory. But before that, German PPI (Jan) and Industrial Production (Jan) are awaited.
• ASIA MARKETS: Bank of Japan member Junko Nakagawa signaled that the negative interest rate environment in JAPAN may soon see its end. The Dollar recorded its biggest drop since late December over the Japanese Yen, which strengthened amid data showing nominal wages of Japanese workers jumped in January, after the country’s main labor union won a large pay hike in 2024 wage talks. Against the Japanese Yen, the US Dollar fell 0.88% to 148.05. The DOLLAR INDEX fell 0.52% to 102.80, and the Euro gained 0.47% at USD 1.0948. The Yen’s resurgence pulled Japanese stock indices down from near-record positions. Japan’s Nikkei shed 492.07 points, or 1.23%, to 39,598.71; in contrast to MSCI’s index of non-Japan Asia Pacific stocks which ended the day up 0.53%. Good news from CHINA: The Trade Balance surplus increased rapidly to USD 125.16 billion in February 2024 when compared to USD 75.34 billion in the previous month, surpassing the market forecast of USD 110.3 billion, as Exports increased more than Imports. Both Exports and Imports grew significantly by 7.1% and 3.5% yoy respectively, beating expectations of 1.9% and 1.5% growth.
• COMMODITIES: GOLD prices hit an all-time high on Thursday as Powell’s comments fostered expectations of a US rate cut this year, which would make safe-haven assets more attractive to investors. Gold prices on the spot market rose 0.46% to USD 2,158.27/ ounce. US Gold Futures rose 0.4% to USD 2,158.90/ounce. OIL prices closed with a slight change. US WTI crude fell 20 cents/barrel to USD 78.93, while Brent remained flat around USD 82.96/barrel. Sentimentally, Oil is still getting supportive sentiment from projections of possible US and European interest rate cuts in June, as well as optimism of improved demand from CHINA as their oil import growth was last recorded up 5.1% for the first two months of 2024, to a level of 10.74 million barrels/day, as oil purchases peaked ahead of the Lunar New Year holiday.
• JCI closed at the highest Closing point since the beginning of the year, thus opening optimism that this bullish wave can still be maintained, hopefully breaking the record high at 7403 as positive sentiment from regional markets amidst the Fed rate cut projection. Indonesia’s commodity driven market also benefits from the resurgence of commodity prices. In terms of economic data: Bank Indonesia (BI) reported that Indonesia’s Foreign Exchange Reserves at the end of February 2024 reached USD 144.0 billion, down from January 2024 position of USD 145.1 billion. This decline was due to the repayment of government external debt but still kept 6 months of import financing adequacy and safe above the international standard of 3 months. In response to all sentiment factors, NHKSI RESEARCH is quite optimistic that the global market will be fine during the Indonesian market’s long holiday until Tuesday next week, but still warns not to be too aggressive positioning at the end of this week to avoid an unexpected blow at the beginning of next week.
Company News
• CMRY: Collected IDR1.24 T Net Profit
• UNTR: Acquires Geothermal Company for IDR1.26 T
• ADCP: Earned IDR116 Billion Net Profit
Domestic & Global News
• Import Permits Delayed, Beef Stock Dwindling Ahead of Ramadan
• Malaysia’s Response after WTO Rejects Lawsuit on EU’s Anti-Palm Campaign
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