Today’s Outlook:
• Global stock indices fell in Monday’s trading (07/10/24) and US bond yields rose, with the yield on the 10-year note hitting 4%, as investors readjusted their views on the Federal Reserve’s interest rate direction. The 10-year US Treasury note rose to 4.033%, the highest level since August 1 and the first time above 4% since August 8 after a stronger-than-expected US Nonfarm Payroll report released on Friday boosted expectations that the Fed will reduce its aggressiveness in lowering interest rates. Expectations for a Fed rate cut of 25 basis points (bps) at the central bank’s November meeting stood at 84.6%, with the market pricing in a 15.4% probability that the central bank will keep rates in place, according to the CME FedWatch Tool. Whereas a week ago, the market was actually expecting a cut of at least 25 basis points, with a 34.7% chance of a 50 basis point cut after the Fed began cutting rates at its September meeting with a 50 basis point cut. As a result on Wall Street, stocks closed in negative territory, with the Energy sector being the only S&P 500 sector to post gains as Crude oil prices continued to rise amid fears of escalating tensions in the Middle East reducing supply. The Dow Jones Industrial Average fell 398 points, or 0.9%, the S&P 500 dropped 1%, and the NASDAQ Composite plunged 1.2%.
• COMMODITIES: Hezbollah rockets on Monday hit Haifa, Israel’s third largest city, which appears poised to expand its ground offensive into southern Lebanon on the first “anniversary” of the Palestinian war. US crude oil closed up 3.71% to USD 77.14/barrel and BRENT rose to USD 80.93/barrel, to close up 3.69% yesterday.
• CURRENCY & FIXED INCOME:
– 10-year and 2-year US TREASURY yields extended gains to their highest levels since late July and mid-August, as Fed Fund Rate futures readjusted with an 85% chance of a 25bps cut at the November FOMC MEETING and a 15% chance only that the Fed will again set an aggressive 50bps cut. The 10-year Treasury yield ended above 4% for the first time since exactly 2 months ago on August 08.
– While this did not help the US DOLLAR much, along with the two other safe haven currencies: Japanese Yen & Swiss Franc, the Dollar retained bargaining power as acute Middle East tensions threatened to spill over into a more escalated conflict on the anniversary of the Hamas attack on Israel that sparked the war in Gaza. The Dollar fell about 0.5% against the Japanese YEN after rallying above 149 overnight to a 7-week high since August 15. BANK OF JAPAN said widespread wage hikes underpinned consumption and encouraged more companies in the region to pass on rising labor costs, signaling that the Japanese economy is making progress meeting the prerequisites for an interest rate hike; thereby boosting the Yen’s exchange rate position. In overall, the DOLLAR INDEX (DXY), which measures the greenback’s strength against a basket of currencies, slipped 0.05% to 102.48; with the Euro down 0.03% at USD 1.0973. POUNDSTERLING fell 0.22% to USD 1.3083.
• ASIA & EUROPEAN MARKETS:
– Yen weakness helped Japan’s NIKKEI rally nearly 2% on Monday, leading a broader rally across the region. MSCI’s index of AsiaPacific shares rose nearly 1% and the Asia ex-Japan index gained nearly half a percent. CHINA markets will reopen this Tuesday after the Golden Week holiday, with investors preparing to consider a stock market rescue thanks to a flood of stimulus from the Chinese government, even the most aggressive stimulus since the COVID-19 pandemic. Today will be monitored: Japan Tankan manufacturing and services index (Oct), JAPAN Household Spending (Aug), GERMAN Industrial Production (Aug).
– From Continental Europe, GERMAN Factory Orders (Aug) fell unexpectedly deep, while Retail Sales from EUROZONE increased drastically in Aug.
• INDONESIA: released a Foreign Exchange Reserves figure of IDR 149.90bn, a safe figure reflecting about 6.6 months of import cover. What is relatively unsafe may be the JCI and also the plunging RUPIAH exchange rate. JCI could not even cross its current MA50 resistance at 7550. USD/IDR has pushed back to above 15,700. This can not be separated from the influence of foreign net sell that occurred again, this time amounting to IDR 835.89 billion, thus returning foreigners to a Net Sell YTD position of IDR 1.18 trillion. NHKSI RESEARCH estimates that the potential consolidation could still continue until JCI touches the following Support at 7400 (especially due to soaring sovereign bond yields); investors/traders are advised to WAIT & SEE on the sidelines.
Company News
• TOBA: TBS Energi Utama to Dispose of Subsidiary Shares, Waiting for GMS
• KIJA: Jababeka Management Mentioned KIJA’s Shares Flew Because of This
• ISAT: Indosat Sets Stock Split Implementation 1:4
Domestic & Global News
Minister of Industry Mentions Flood of Imported Products as the Culprit of 5 Months of Deflation
Soaring Prices, China’s Central Bank Brakes Gold Purchases for Fifth Straight Month
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