Today’s Outlook:
• Stock markets on Wall Street hit record highs for the umpteenth time on Thursday (07/11/24), lifting equity markets around the world, while US Treasury yields fell after the Federal Reserve cut interest rates as investors weigh Donald Trump’s second term as the 47th US president. The S&P 500 rose 0.74%, the Dow Jones Industrial Average was flat, and the Nasdaq Composite jumped 1.5%. The S&P 500 and Nasdaq both ended at all-time highs for the second consecutive day. MSCI’s index of world stocks rose 0.9%, also to a record high.
• MARKET SENTIMENT: The FEDERAL RESERVE finally cut interest rates by 25 basis points to 4.50% – 4.75% on Thursday, as expected, noting that the labor market has generally eased, while Inflation is moving towards the 2% target and economic activity also continues to expand at a solid pace, as well as confirming that price pressures have made progress. The next question from market participants is whether the Fed will cut again in December, and what impact will the Trump administration’s policies have on the future of the FFR? In the press conference following the announcement, Fed Chairman JEROME POWELL said the election results would not impact policy decisions in the near term. He also said some downside risks to the economy have diminished amid stronger economic data. The market now expects that the Fed is likely to stop cutting interest rates after two more rate cuts of 25 bps each in the first half of 2025, so the Fed Funds Rate will be in the range of 3.75%-4%. Prior to the election results, the market expected a rate cut of around 190 basis points by the end of next year. Economists judged Powell’s comments to be generally dovish, and are still comfortable with the expectation of another 25 bp cut in December.
• ECONOMIC INDICATORS: In response to Powell’s comments on labor, INITIAL JOBLESS CLAIMS for the latest week came in at 221k latest jobless claims, up 3k from the previous week, although still below the forecast of 223k. Further tonight will be monitored the views of the Univ. Of Michigan views on Inflation & consumer expectations in the next 6 months.
• ASIA & EUROPEAN MARKETS: Europe’s STOXX 600 index rose 0.6% after Asian stocks rallied early in yesterday’s session, with even CHINA’s top domestic stock rising 3% as investor optimism over potential stimulus outweighed concerns about worsening trade tensions.
– CHINA reported above-expected Trade Balance surplus figures, supported by faster growth in Exports than Imports which actually seemed to drop in Oct, signaling weak domestic demand. With Trump on board, China’s stock market is arguably vulnerable to the threat of tariffs from Washington, but on the one hand it could hasten a stronger policy response from Beijing, which might actually support local stocks. Investors are focused on awaiting the outcome of the National People’s Congress Standing Committee meeting that ends on Friday. Any stimulus surprises from the meeting will likely help lift market sentiment in Chinese stocks. Investors will also pay close attention to China’s Inflation data on Saturday. The annual rate of consumer inflation is expected to remain steady at 0.4% in October, according to a Reuters poll, while producer price deflation is seen easing only slightly to -2.5% from -2.8%.
– JAPAN: Household Spending (Sept) contracted further on a monthly basis. This morning the NIKKEI 225 has gained 3.5%, heading for its best week in 6 weeks. Many analysts are increasingly optimistic on Japanese stocks, citing attractive valuations and the assumption that the Yen remains weak. Asian stocks outside Japan entered Friday’s session up almost 2% on the week, which would be the biggest gain for 5 weeks. However, during October, capital outflows were detected to have increased sharply. The outlook for Asian stocks under Trump is also mixed. On one hand, increased demand for risk assets and a buoyant Wall Street are positive sentiments for Asian emerging markets. But on the other hand, a stronger dollar and higher US bond yields could tighten financial conditions and encourage capital outflows from some countries.
– Ahead of the Fed’s decision, the BANK OF ENGLAND has cut interest rates by 25bps on Thursday for the second time since 2020. The UK central bank said future reductions are likely to be gradual, as it sees higher inflation after the new government’s first budget last week. POUNDSTERLING extended its gains slightly after the decision and was last up 0.8% at USD 1.2986, following a 1.24% decline on Wednesday.
• FIXED INCOME & CURRENCY: US TREASURY YIELD continued to decline after the Fed’s rate cut, although some investors warned that interest rates may not fall as steadily as expected under a second-term Trump administration. The latest benchmark 10-year US Treasury yield was at 4.3355%, down 9 basis points on the day, after a 14 basis point increase on Wednesday, and the latest 30-year yield was at 4.5393%, down more than 6 basis points after a 15 basis point increase the previous day.
– The US DOLLAR fell 0.7% against a basket of other currencies after recording its biggest daily gain in over 2 years on Wednesday.
– The YUAN on Thursday bounced back slightly from a 3-month low reached the previous day. The Yuan’s decline in the spot market of around 1% on Wednesday, in direct reaction to Trump’s election victory, was its biggest drop since February 2020.
– The EURO rose 0.7% to USD 1.0803 after a 1.8% drop on Wednesday, as investors also digested the political turmoil in GERMANY where Chancellor Olaf Scholz fired
Finance Minister Christian Lindner, causing the ruling three-party coalition to collapse and setting the stage for an impromptu general election. Deutsche Bank analysts said that although it is still early, the development could be positive for the Euro due to the potential confidence boost from a more stable German government and the immediate economic impact of a potentially more proactive fiscal stance. German 10-year government bond yields were last up 4.8 basis points at 2.441%. As supporting economic indicators, GERMANY reported their Industrial Production dropped deeper than expected, as well as not being able to create a Trade Balance surplus as expected, both in Sept.
– BITCOIN reversed earlier losses and surged to a new record high of USD 76,780 overnight. Trump has promised to make the United States “the crypto capital of the planet.”
• COMMODITIES: GOLD rose 1.8%, following a drop of more than 3% on Wednesday, to USD 2,707.21 per ounce. However, it is still not far from the recent record high of USD 2,790.15.
– OIL reversed losses from the sell-off triggered by the US presidential election. BRENT crude oil rose 0.6% to USD 75.4/barrel. US West Texas Intermediate (WTI) crude also rose 0.5% to USD 72.04.
• INDONESIA: reported Oct FX Reserves at USD 151.2bn, up from Sept at USD 149.9bn. Today we will wait for Motor & Car Sales data for Oct. JCI further emphasized the decline by falling another 140 pts / almost -2% to 7243.86, in line with our forecast which predicted JCI decline to occur within a DOUBLE TOP bearish reversal pattern, where Target bottom is expected to be around 7000-6950. Please note that foreign net sell flow is getting heavier at IDR 1.56 trillion occurred yesterday; the RUPIAH exchange rate is at 15,730/USD. NHKSI RESEARCH advises investors to WAIT & SEE again at the end of this week while waiting for JCI to land on solid Support.
Company News
• PTRO: Prajogo Pangestu’s Issuer Conducts Stock Split 1:10
• EXCL: XL Axiata Recorded IDR 25.3T Revenue in Third Quarter, Up 6 Percent
• MPMX: Third Quarter 2024, MPMX’s Profit and Revenue Surge Compactly
Domestic & Global News
Prabowo Orders New Head of SKK Migas to Immediately Boost Lifting
Trump’s tariff threats push Taiwan to help firms move production from China
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