HEADLINES

Economy

US: Fed's Powell expects inflation to fall, though not as confident as before. Fed Chair Jerome gave a bullish assessment of where the U.S. economy stands now, with an outlook for continued above-trend growth and confidence in falling inflation that, while eroded by recent data, remains largely intact. "I expect that inflation will move back down ... on a monthly basis to levels that were more like the lower readings that we were having last year," Powell said. Though he said "my confidence in that is not as high as it was," given faster than expected inflation through the first three months of the year, the US central bank chief said it remained unlikely in his view that the Fed would have to raise rates any further, even if the prospect for rate cuts has become less certain. (Reuters)

US: Strong services fan producer inflation in April. The producer price index for final demand rose 0.5% last month after falling by a downwardly revised 0.1% in March. Economists polled by Reuters had forecast the PPI gaining 0.3% after a previously reported 0.2% rise in March. A 0.6% jump in services accounted for nearly three-quarters of the increase in the PPI. April's rise was the largest since July 2023 and followed a 0.1% dip in March. In the 12 months through April, the PPI increased 2.2% after climbing 1.8% in March. Inflation surged in the first quarter amid strong domestic demand after slowing for much of last year. Economists had largely attributed the rise to a combination of businesses raising prices at the start of the year and providers of services like motor vehicle insurance catching up to higher costs. They are optimistic that inflation will resume its downward trend this quarter as the labor market is cooling. (Reuters)

EU: German economic advisers to cut 2024 growth forecast, sources say. The German Council of Economic Experts expects 0.2% gross domestic product growth this year, according to sources who have seen a draft document. For 2025, the economic experts forecast 0.9% growth, sources said. In its autumn forecast published in November 2023, the panel of experts forecast growth of 0.7% for 2024. The German economy shrank by 0.2% last year, the weakest performance among big euro zone economies, as high energy costs, lacklustre global orders and record high interest rates took their toll. (Reuters)

EU: German final inflation confirmed at 2.4% in April. German inflation inched up in April to 2.4%, the federal statistics office said, confirming preliminary data. German consumer prices, harmonised to compare with other European Union countries, had risen by 2.3% YoY in March, the lowest rate in almost three years. "Energy and food prices, in particular, have had a dampening effect on the inflation rate since January 2024," said Ruth Brand, president of the federal statistics office. "However, core inflation – measured as the change in the consumer price index excluding food and energy – has been higher than overall inflation since the beginning of the year," she added. Core inflation in April was 3.0%, according to the data.

UK: Mixed labour market signals leave BoE on rate cut alert. British wages grew by more than expected, but other figures suggested the labour market is losing some of its inflationary heat, keeping the BoE on alert about when to cut interest rates. Regular wages, excluding bonuses, rose by 6.0% in the first three months of 2024 compared with the same period in 2023. Economists polled by Reuters had forecast growth of 5.9%, slowing from 6.0% in the three months to Feb. BoE Chief Economist Huw Pill said the labour market remained tight by historical standards but the central bank could consider cutting rates over the summer. (Reuters)

Japan: IMF endorses Japan's commitment to flexible yen. The IMF said Japan's commitment to allow the yen to move flexibly will help the central bank focus on achieving price stability, warning against growing calls by some analysts to use monetary policy to slow the currency's decline. The IMF's executive board also said further hikes in the BOJ short-term policy rate should "proceed at a gradual pace and be data-dependent," given balanced risks to inflation and mixed signals in recent data. (Reuters)

India: April wholesale price index rises at fastest pace in a year. India's wholesale price-based inflation rose 1.26% in April, the highest pace in a year, mainly driven by food and primary articles. The April figures were higher than the 1% rise expected by economists polled by Reuters and up from a 0.53% year-on-year rise in March. Wholesale inflation was the highest since March 2023, when it hit 1.41%. (Reuters)

Australia: Budget doles out energy, rent relief in bid to tame inflation. Australia's government plans to spend billions to cut energy bills and rent, hoping to lower headline inflation and provide relief for voters grumbling about cost of living pressures ahead of an election next year. In his third annual budget since taking office in 2022, Treasurer Jim Chalmers pledged more money for renewables, critical minerals and defence, alongside a long planned cut to income taxes by an average AUD1,888 a year for each taxpayer. (Reuters)

Markets

Uzma (Outperform, TP: RM1.70): Gets ExxonMobil contract. Uzma has received a letter of award from ExxonMobil Exploration and Production Malaysia Inc (EMEPMI) for non-rig assisted, electric wireline logging equipment and services in Peninsular Malaysian waters. Uzma said the scope of work includes technical consultancy and provision of electric-line unit, logging services, tractoring, and perforation interchangeable between different conveyances. It added that the duration of the contract was for a period of three years commencing from May 3, 2024 until May 2, 2027. (StarBiz)

Comment: We estimate the contract size is about RM40m for next 3 years until 2027. This will marginally increase its existing orderbook of RM2.7bn. We are positive on the seventh contract announced for FY24 as indicates the increasing brownfield activities on the offshores on the back of stable oil prices. We retain our outperform call and TP RM1.70.

Deleum: Unit enters into settlement agreement in suit over alleged illegal scheme. Deleum’s 60%-owned unit has entered into a settlement agreement with six of the 10 defendants in its RM19.9m civil lawsuit against its own executives, Petronas Carigali SB executives and its sub-contractors over an alleged illegal scheme. Under the agreement, Deleum Technology Solutions SB (DTS) — formerly known as Deleum Primera SB (DPSB) — will have to discontinue the suit against the six defendants and pay a sum of RM834,225 to one of the defendants, as part of outstanding invoices. Besides that, another one of the defendants will admit liability and pay RM100,000 to DTS, as part of the settlement. (The Edge)

Kumpulan Jetson: Shareholders' requisition notice to remove directors ruled invalid by court. The High Court has ruled that the requisition notice from 10 shareholders of Kumpulan Jetson seeking an EGM to remove the directors of the construction group is invalid. Judge Wan Muhammad Amin Wan Yahya also ruled that any further action taken regarding the requisition notice is null and void, and granted the group RM10,000 in costs, said Kumpulan Jetson. (The Edge)

Ageson: Says 'no material adverse findings' from independent assessment. Ageson, whose external auditor raised concerns about its receivables as well as its subsidiaries’ revenues and asset valuation, announced that consultant Virdos Lima Consultancy (M) SB did not find any “material adverse findings from its independent assessment”. In October last year, the engineering construction firm’s external auditor Messrs Jamal, Amin & Partners raised concerns about certain audit issues in its financial statements for the 18-month financial period ended Dec 31, 2022. (The Edge)

BCB: Buys Johor land for RM84m. BCB is acquiring 59 parcels of freehold land in Batu Pahat, Johor from Lian Hup Seng SB for RM83.71m. BCB said the land will also include four single-storey semi-detached buildings, one single-storey building used for storing fertilisers, a single-storey building used for storing chemicals and tools and a single-storey dilapidated building. BCB said the acquisition will add approximately 286 acres to its existing land bank. (StarBiz)

MARKET UPDATE

US markets ended the day higher despite less than encouraging inflation-related numbers, as investors continued to wait on the more widely-followed consumer price index. On the day, producer price index numbers were released, with April’s reading gaining 0.5% month-on-month (beating estimates of a 0.3% gain). The market’s initial reaction was understandably negative though subsequently turning positive as the March wholesale prices reading was revised lower to show a 0.1% decline. This was enough to ease concerns about stubbornly high prices. The Dow Jones Industrial Average and S&P 500 rose 0.3% and 0.5% as the Nasdaq Composite jumped 0.8% higher. European markets were less enthused with the current set of US inflation numbers with markets ending mixed on the day. Auto stocks continued to lead gains on the continent. UK’s FTSE 100 and France’s CAC 40 both inched 0.2% higher though Germany’s DAX slipped 0.1%. Asian markets were also mixed earlier in the day as investors assessed inflation data out of Japan and India while waiting on the United States’. Data from the Bank of Japan showed that corporate inflation was steady in April compared to a year earlier though import prices jumped 6.4% YoY last month due to weakness in the Yen. The Hang Seng and Shanghai Composite indices slipped 0.2% and 0.1% though the Nikkei 225 rose 0.5%.

Source: PublicInvest Research - 15 May 2024