Today’s Outlook:
• Wall Street closed higher on Tuesday (08/10/24) on the back of buying in Technology stocks as investors awaited US Inflation data and the start of Q3 earnings releases; after falling around 1% due to selling pressure on Monday from a spike in US Treasury yields, rising Middle East tensions, and a re-evaluation of US interest rate cut expectations. The easing of bond yields on Tuesday, however, made investors interested in high-growth stocks, which benefit from lower borrowing costs to fuel their growth, such as Technology companies. Stock names of heavyweight Tech companies rallied, helping to push the NASDAQ and S&P 500 back above the levels they reached last week. Nvidia, one of the Magnificent Seven, rose 4.1% for the biggest daily percentage gain in a month. Apple, Tesla, and Meta Platforms all rose between 1.4% and 1.8%. The S&P 500 rose 0.97%, while the Nasdaq Composite jumped 1.45%, the Dow Jones Industrial Average gained 126.13 points, or 0.30%, to 42,080.37.
• MARKET SENTIMENT:
– Most S&P sectors advanced, although two sectors ended negative. One of these was the Materials sector, which fell 0.4% as metal prices slumped on waning optimism over CHINA’S STIMULUS measures. Shares of US-listed Chinese companies also fell, tracking the declines in the domestic Hang Seng & SSEC markets. Shares of Alibaba Group, JD.com, and PDD Holdings fell between 5.4% and 7.5%. The Energy sector was the hardest hit sector, slipping 2.6% in its biggest one-day decline since August 20, as oil prices fell after rallying on Monday.
– The market is currently awaiting the US CPI data, which will be released this Thursday (in addition to the FED MINUTES) for further clues on the Fed’s interest rate and review of the deteriorating labor market. If the CPI comes out as expected, it signals a 25 bps rate cut at the November FOMC Meeting, which market participants have now priced in a nearly 87.3% chance of, and a 12.7% chance that the central bank will not cut rates at all, according to CME FedWatch. The Fed Funds Rate is still leaning towards easing another 50 bps until the end of the year.
– QUARTER 3 FINANCIAL REPORTS are also in focus, with major banks scheduled to report this Friday. The estimated earnings growth rate for the S&P 500 is 5%, according to LSEG estimates.
– Markets are also still focused on the rising risk of MIDDLE EAST CONFLICT as Israel continues to step up its military incursions into Lebanon to combat Hezbollah, while continuing the war with Hamas in Gaza.
• ASIA & EUROPE MARKETS:
– CHINA stocks briefly rallied to a 2-year high after the Golden Week holiday, but lost traction after the Chinese government provided no details of stimulus implementation to maintain market optimism. Hong Kong’s Hang Seng Index plunged 9.4%, its biggest drop since 2008, erasing some of the large gains made after the holiday, after government economic planner Zheng Shanjie told reporters that China was “”very confident“” of achieving its economic targets for 2024 and would withdraw 200 billion Yuan (USD 28.36 billion) from next year’s budget to spend on investment projects and support local governments. But the failure to adequately detail the new measures sparked concerns about China’s commitment to pulling their economy out of its current slump. The Shanghai Composite and CSI300, which were both closed over the holiday, ended 4.6% and 5.9% higher respectively, trimming early session gains that had been over 10%. ”
– JAPAN’S Household Spending improved on a monthly basis in Aug, rising 2.0% mom and this was higher than the 0.5% forecast; although on an annualized basis it still contracted 1.9% yoy. On the flip side, INDONESIA reported slumping Sept Motorcycle Sales and Consumer Confidence which again fell from the previous month, this Sept at 123.5, lower than 124.4 in Aug. A better performance came from the EUROPEAN continent, where GERMAN Industrial Production appeared to strengthen in Aug.
• COMMODITIES: OIL prices fell sharply following a potential ceasefire after the recent rally triggered by the escalation of the MIDDLE EAST CONFLICT, which raised concerns of supply disruptions. US WTI & BRENT crude both fell 4.63% to USD 73.57/barrel, and USD 77.18/barrel respectively. Israeli Prime Minister Benjamin Netanyahu said their airstrikes had killed two of Hezbollah’s successors, as Israel expanded its offensive against the Iran-backed group. The comments came hours after Hezbollah’s deputy leader opened the door to negotiating a ceasefire. Furthermore, API Weekly Crude Oil Stock data revealed a surge in US crude oil inventories by 10.9 million barrels, well above the forecast of 1.95 million barrels, following a withdrawal of 1.458 million barrels in the previous week.
• CURRENCY & FIXED INCOME: The US DOLLAR edged up 0.05% against the Japanese Yen and 0.67% against the Chinese Yuan on Tuesday. The 10-year US TREASURY YIELD held above 4% for a second day.
• JCI made an upside attempt but was immediately stopped by the first Resistance: MA10 exactly at 7592.88 high point. Despite closing up 53pts/+0.71% to 7557 level, foreign Net Sell was still observed, albeit thin at IDR 39.74 (RG market). NHKSI RESEARCH expects JCI to capitalize on regional market sentiment shifting from China market back to Indonesia, starting from the strengthening of JCI’s backbone sector, Finance yesterday. However, we need to remind that it is crucial for JCI to continue to maintain the increase at least until it breaks 7600 (Closing position) to neutralize the threat of further consolidation.
Company News
• RAJA: Happy Hapsoro Issuer, RAJA, Invests IDR 982.45 Billion, Working on Pertamina’s Fuel Pipeline
• CUAN: Prajogo Pangestu’s CUAN Talks Coal & Metal Mineral Assets Acquisition
• PGAS: PGN Aims for Natural Gas Development in Sulawesi through New MoU
Domestic & Global News
Credit Scoring Scheme KUR Disbursement to be Implemented in Prabowo’s Era
Israel Says It Has Killed Slain Hezbollah Leader’s Successors
Download full report HERE.