Cautious sentiment prevails amid holiday-shortened week 

KLCI: 1555.25 (2)
DOW: 38904.04 (307.1)
MSCI Asia: 175.21 (-1.3)
FCPO (RM): 4343 (-57)
BRENT (USD): 91.17 (0.52)
USDMYR: 4.7475 (0.007)
SGDMYR: 3.5223 (0.003)
EURMYR: 5.1456 (-0.002)
AUDMYR: 3.1265 (-0.004)
GBPMYR: 5.9983 (-0.005)
US: 10-yr yield (%) 4.4016 (0.092)
BNM:10-yr yield (%) 3.838 (-0.019)

Asia/US. Ahead of the major US jobs data, most Asian markets ended lower following hawkish signals from Fed officials that sticky inflation will delay any potential interest rate cuts this year. Moreover, Middle East tensions as Iran threatened military action against Israel and a 2% slide on Nikkei 225 amid increased uncertainty over the path of inflation and monetary policy in Japan further dampened sentiment. 

After a 4-day 1,210-pt slump, the Dow rebounded 307 pts to 38,904 (-903 pts WoW) in wake of the upbeat March jobs report, which reinforced the notion of a healthy US economy and overshadowed the expectations of the Fed’s pivot. Meanwhile, the US10Y Treasury yields jumped 9 bps to 4.40%, with traders trimmed the probability of rate cut in June to about 51% from 55% a week ago. Following the robust March jobs data, this week’s CPI, PPI and the March FOMC minutes will probably be the litmus tests for the Fed’s policy moving forward.

Malaysia. Bucking the sluggish Wall St and regional markets performance, KLCI eked out a 2-pt gain at 1,555.3 (+19.2 pts WoW). However, market breadth was negative at 0.86 vs 1.87 a day ago. Local retailers (-RM22m, Apr: -RM222m, YTD: -RM1.53bn) joined foreign institutions (-RM132m, Apr: -RM335m, YTD: -RM1.21bn) as major net sellers whilst local institutions (+RM154m, Apr: +557m, YTD: +RM2.74bn) emerged as the net buyers. 

Outlook In conjunction with the holiday-shortened week, barring a decisive fall below 1,529-1,534 support levels, the odds would still favour for KLCI to surpass YTD high of 1,559, underpinned by the positive technicals and aligned with KLCI’s historical average Apr gains of 0.6% and 1.5% over the past 10 and 20 years. Nevertheless, cautious sentiment prevails as investors weigh (i) expectations for Fed rate-cut policy, (ii) heightened geopolitical tensions, (iii) commodity-driven inflation resurgence, (iv) RM weakness coupled with (v) persistent foreign net selling (Mar: -RM2.87bn, Apr: -RM335m, YTD: -RM1.21bn) for the 6th consecutive weeks.