Stormy waters ahead amid war jitters, elevated inflation and Fed’s pivot rethink 

KLCI: 1551.04 (-2.5)
DOW: 37983.24 (-475.8)
MSCI Asia: 175.31 (-1.2)
FCPO (RM): 4282 (-36)
BRENT (USD): 90.45 (0.71)
USDMYR: 4.7705 (0.023)
SGDMYR: 3.5118 (-0.02)
EURMYR: 5.0856 (-0.069)
AUDMYR: 3.1035 (0.007)
GBPMYR: 5.9624 (-0.056)
US: 10-yr yield (%) 4.5216 (-0.065)
BNM:10-yr yield (%) 3.91 (0.036)

Asia/US. Asian markets fell as investors weighed heightened geopolitical tensions in the Middle East amid news that the US is reportedly bracing for an “imminent” strike by Iran or its proxies against Israel. Investors were also grappled with concerns over elevated US inflation, and persistent deflationary trend in China coupled with expectations of a subdued Mar trade surplus. Dow slid 476 pts at 37,963 (-921 pts WoW) while safe havens such as bonds, golds and dollars soared amid heightened tensions in the Middle East, disappointing outlook guidance from mega banks (e.g. JPM, WFC, and C), as well as higher-than-expected inflation expectations. This week, major market events to focus are: (i) heightened conflicts in Russia-Ukraine and Israel-Iran, (ii) earnings season (GS, BAC, J&J, MS, UNH, TSMC, NFLX, AXP and PG), and (iii) economic indicators (Fed officials’ speeches, retail sales, housing starts

Malaysia. Tracking the negative Wall St and regional markets’ performance, KLCI slipped 2.5 pts to 1,551 (-4.2 pts WoW) on ongoing foreign outflows and weakening RM (vs USD). However, market breadth was positive at 1.13 vs 0.94 on 9 Apr, underpinned by 12% jump in trading volume to 3.08bn shares and 45% surge in trading value to RM3bn. Foreign institutions intensified their outflows for the 4th straight session (-RM208m, Apr: -RM710m, YTD: -RM1.58bn), along with local retailers (-RM4m, Apr: -RM280m, YTD: -RM1.59bn) whilst local institutions (+RM212m, Apr: +RM990m, YTD:RM3.17bn) emerged as major net buyers

Outlook Tracking the US markets’ consolidation, KLCI should slip back into sideways consolidation (support: 1,518-1,538; resistance:1,565-1,584) as investors assess (i) heightened geopolitical tensions (Israel-Iran and Russian-Ukraine), (ii) inflation resurgence due to rising commodities’ prices and potential supply chain disruptions, (iii) Fed’s rate cut policy, (iv) the commencement of the US 1Q24 results season, (v) RM weakness and persistent foreign net selling (for a 7th consecutive week), and (vi) potential earnings disappointment at the start of Bursa Malaysia 1Q24 results season (expected from the 4th week of April).