Today’s Outlook:
The Personal Consumption Expenditures (PCE) price index, considered the Federal Reserve’s preferred inflation gauge, climbed 3.3% yoy in July, in line with expectations. Meanwhile, the Core PCE price index (which excludes volatile food & energy prices) also rose as expected at 4.2% yoy in the same month. On the other hand, Consumer Spending rose 0.8% mom in July, the fastest pace in more than six months, perpetuating the notion of a resilient consumer spending power. Traders’ expectations for a pause in rate hikes at the Fed’s September policy meet remained at an 88.5% chance, while they also bet a 51% chance on the Fed keeping rates unchanged in November, according to the CME Group’s FedWatch tool. While the data that has been released is quite in line with market expectations, thereby aligning with the purpose of the interest rate hike trend that has been carried out since 2022. Market participants will now focus on the following data that will appear this Friday, namely Nonfarm Payrolls. Please note, weekly jobless claims for the week ending August 26 only came out at 228 thousand, below the estimate of 235 thousand. The data follows slower growth in ADP Nonfarm Payrolls which was released earlier on Wednesday, signaling a softening labor market and a positive catalyst for the market. The 10-year US Treasury yield also reacted by dropping to 4.09%, giving an upward push to large Tech stocks.
From Asia, China released Manufacturing PMI (Aug.) data which looks increasingly vibrant at 49.7, although not yet crossing into expansionary territory but the reading has exceeded expectations & last month’s position at 49.3. Unfortunately China’s Non-Manufacturing PMI retreated to 51.0 (missing expectations and lower than the previous month); bringing the Chinese Composite PMI up just 0.2 points to 51.3 in August. While from continental Europe, Germany reported Retail Sales in July plunged on a monthly and annual basis, unable to meet expectations and clearly showing a downward trend compared to the previous month. Meanwhile, the unemployment rate of Europe’s largest economy was recorded at 5.7% in August, in line with expectations that the level had increased from the previous month at 5.6%. 18,000 new unemployed people appeared in August, much higher than only 1,000 in the previous month. The Eurozone gave a preliminary estimate of the August Inflation rate at 5.3% yoy, above expectations of 5.1%; they also released the July Unemployment Rate which was unchanged at 6.4%.
Here are some important data that investors should be monitoring today: Japan has reported 2Q23 Capital Spending which fell to 4.5%yoy, from 11% in the previous quarter. While South Korea has announced a Trade Balance (Aug.) surplus of KRW 870 million, unfortunately missing expectations at KRW 1.65 billion, triggered by Exports & Imports which are still immersed in negative growth although it has slowed somewhat from the previous month. Both countries mentioned above will soon report their August Manufacturing PMI, almost at the same time as Indonesia and China release the same data. Indonesian investors will also be looking forward to August Inflation data which is estimated to come in at 3.33% yoy, up from July at 3.08%. Later in the evening, the US stock market will react to the release of Average Hourly Earnings (Aug.), Nonfarm Payrolls (Aug.), Unemployment Rate (Aug.), and Manufacturing PMI data for August.
Corporate News
Bank Mandiri (BMRI) Ready to Pay Matured Bonds IDR 3 Trillion PT Bank Mandiri (Persero) Tbk (BMRI) has prepared funds for the payment of Sustainable Bonds I phase III 2018. Rudi As Aturridha, Corporate Secretary of BMRI, in a written statement on Wednesday (30/8) said that BMRI has prepared IDR 3 trillion for the payment of the principal of Sustainable Bonds I phase III Year 2018. For information, the 2018 Sustainable Bonds I phase III will mature on September 21, 2023. (Bareksa)
Domestic Issue
Government Sets SR019 Coupon at 5.95 Percent and 6.10 Percent The government will open the Retail Sukuk or SR019 offering period on Friday, September 1, 2023. The issuance of SR019 will be an investment alternative for individual investors who are interested in retail SBN starting from IDR 1 million. The DJPPR of the Ministry of Finance announced that SR019 consists of two series, namely SR019T3 (3-year tenor) with a coupon of 5.95%, and SR019T5 (5-year tenor) with a coupon of 6.10%. The offering was conducted on September 1-20, 2023. (Bisnis)
Recommendation
US10YT is still immersed below MA20 & MA10, causing yield 4.181% – 4.20% as the closest Resistance range at the moment. In the medium term, the yield is still relatively Uptrend in the Parallel Channel pattern. ADVISE: HOLD; Wait & See.
ID10YT plummeted further and now yield is below MA20, which puts 6.443% yield as the closest Resistance at the moment. Technical rebound reaction began to appear in the Neckline Support area around 6.371% yield. ADVISE: BUY ON WEAKNESS.
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