Market review

• On the back of an overnight jump in Dow amid a surge in oil prices and the dovish June FOMC meeting minutes, the MSCI Asia Pacific Index ended cautiously higher by 0.3% to 128.9 after scoring a 2-day loss. Overall sentiment remained edgy ahead of the widely anticipated US June jobs data tonight as investors are still assessing the elevated risk levels post Brexit vote.

• Ahead of the Hari Raya holidays on 6 & 7 July, KLCI ended 4.1 pts lower after traded within a range of 8.3 pts between an int ra-day high of 1655.7 and a low of 1647.5 during the hal f day session as market is muted as investors remained cautious ahead of the festive holidays.

• In the wake of stronger-than-expected US June private jobs data, the Dow rose as much as 67 pts to 17986. However, the index reversed its gains and fell 23 to 17896 amid profit taking ahead of the closely-watched June payroll report tonight (for Fed rates hike guidance especially many consider that May's disappointing headline figure was an anomaly) and a 4.7% slump in WTI oil prices after inventories contracted less than anticipated in the past week.

Technical Insights

• Profit taking and subdued interests to cap gains

• With the formation of Doji candlestick and lackluster technical indicators, KLCI is likely to continue its sideways consolidation today on extended Raya holidays mood. Key resistances are 1665 (200-d SMA) and 1671 (50% FR) while supports are 1641 (23.6% FR) and 1636 (downtrend line).

Market Strategy

• After staging strong comeback in the last few sessions, most major markets have returned to the pre-Brexit levels amid hopes for stimulus from global policymakers to limit Brexit fallout.

• However, we still expect global markets to remain volatile for a while as profit taking may emerge after recent sharp relief rallies (without material changes in fundamentals).

• Today, we still expect KLCI to consolidate its recent gains and trade within a range of 1645-1655 on extended Raya holidays mood and to focus on US June jobs data tonight.

Source: Hong Leong Investment Bank Research - 8 Jul 2016