Cautious Mood as Market Weighs Fed’s Slower Rate-cut Chorus and US Jobs Data Tonight

KLCI: 1453.1 (-1.6)
DOW: 38519 (369)
FCPO (RM): 3660 (-61)
BRENT (USD): 78.7 (-1.85)
USDMYR: 4.6058 (0.012)
SGDMYR: 3.4817 (0.004)
EURMYR: 5.0732 (-0.003)
AUDMYR: 3.1418 (0.016)
GBPMYR: 5.8574 (0.021)
US: 10-yr yield (%) 3.88 (-0.03)
BNM:10-yr yield (%) 3.79 (-0.09)

Asia/US. In the build-up to results from mega techs (i.e. Apple, Amazon and Meta), Asian markets ended mixed, led by overnight slide on Wall Street after Powell slashed expectations for a March rate cut. Investors also weighed hawkish signals from the BOJ, a private survey that showed China’s manufacturing sector expanded for the 3rd straight month in Jan (contradicting a downbeat official data released a day earlier) and China’s new property support measures following the from Evergrande’s liquidation. Rebounding from a brutal 317-pt loss a day earlier, the Dow surged 369 pts to a fresh record close at 38,519 while the Nasdaq rallied 1.3% to 15,361, as investors cheered falling UST bond yield (-3 bps to 3.86%) amid rising weekly jobless claim and soring job cuts couple with a sluggish manufacturing PMI data, reinforcing the view that interest rate cuts are imminent as early as May. Sentiment was also boosted by the upbeat results from Apple, Amazon and Meta, ahead of the key non-farm payrolls data tonight. 

Malaysia. Ahead of the FT Day holiday and the FOMC meeting, KLCI ended flat at 1,513 on 31 Jan (+58.3 pts MoM). Market breadth was negative for a 3rd session at 0.63 vs 0.58 a day ago. Foreign investors logged RM166m (Jan: +RM679m), recording its 4th consecutive monthly net inflows while local retailers net bought RM9m (Jan24: -RM667m), extending its net outflows for a 7th straight month. Meanwhile, local institutions (-RM175m, Jan: -RM12m) emerged as the major net sellers, extending its selling for 3rd month in a row. 

Outlook. As investors digest Fed’s slower rate-cut chorus and await the US jobs data tonight, local bourse should extend profit-taking consolidation, reflected by the negative market breadth ratio for a 3rd straight session. Immediate overhead resistance is situated at 1,528, with stronger hurdles coming at 1,550 levels whilst key supports are pegged at 1,481-1,493 zones. 

Source: Hong Leong Investment Bank Research - 2 Feb 2024