More Likely US Rate Cuts to Lift Sentiment

Bursa Malaysia shares ended mixed on Tuesday, as profit-taking in core plantation blue chips were offset by bargain hunting interest in technology and banking heavyweights. The FBM KLCI rose 3.4 points to close at 1,614.42, after being stuck in a narrow range bordering

1,618.02 and 1,613.15, but losers beat gainers 666 to 529 on total turnover of 4.65bn shares worth RM3.84bn.

Resistance at 1,622/1,632; Supports at 1,601/1,594

Hopes that the US Fed chief will be more willing to reduce interest rates given recent softening inflation data should lift market sentiment, with bargain hunting likely rotating towards oil & gas related stocks. Immediate index resistance remains at the early June high of 1,622, with

the May high of 1,632 and 1,640 as tougher upside hurdles, while immediate supports are at 1,601, 1,594 and 1,570, the respective 30-day, 50-day and 100-day moving average levels.

Bargain DNEX & Wasco

DNEX will be attractive to bargain on weakness for rebound upside towards the upper Bollinger band (50sen), with a confirmed breakout to aim for the 38.2%FR (55sen) and 50%FR (62sen) ahead, while the 200-day ma (40sen) limits downside risk. Wasco needs convincing breakout above its upper Bollinger band (RM1.49) to enhance upside potential towards the 31/5/24 peak (RM1.60) and RM1.70 going forward, while the 200-day ma (RM1.19) cushions downside.

Asian Markets Rose Ahead of Powell’s Testimony

Stocks in Asia advanced on Tuesday as traders hoped the U.S. Federal Reserve Chair Jerome Powell would sound dovish about easing prospects later in the day. Traders will be keenly watching Powell's remarks to Congress on late Tuesday and Wednesday for any indications of when the Fed will start cutting rates. He faces pressure from lawmakers growing impatient for interest-rate cuts and others who are unhappy with the Fed’s latest plan to boost capital requirements for Wall Street lenders. Markets are pricing the chance of two rate cuts this year, with a roughly 70% chance of the first in September, according to swaps data compiled by Bloomberg.

Traders are also looking to US consumer inflation data due Thursday for further indications that price increases are still easing as hoped, which would give the Fed greater confidence to start cutting rates. The Nikkei-225 rose 1.96% to hit a new peak at 41,745.64, while the broadbased Topix also added 1.34% to hit new highs at 2,906. Australia’s S&P/ASX 200 added 0.86% to close at 7,829.70 and South Korea’s Kospi gained 0.34% to 2,867.38. The Shanghai Composite Index also jumped 1.26% to 2,959.37, while Hong Kong’s Hang Seng index ended flat at 17,523.23 (-0.83).

S&P 500 Hits Record Close as Traders Digest Powell Comments

The S&P 500 climbed to a fresh record high overnight as traders digest Federal Reserve Chair Jerome Powell's testimony before the Senate Banking Committee. The Dow Jones Industrial Average fell 0.13% to close at 39,291.97. The S&P 500 inched higher by 0.07% to 5,576.98 for its 36th record close of the year and the Nasdaq Composite added 0.14% to close at 18,429.29. In testimony before Congress, Powell said that keeping interest rates elevated for too long could risk further economic growth, seemingly hinting that the central bank is considering taking a less restrictive stance. While Powell has said he didn't want to send any signals on timing of any rate cut, many economists said they were more confident in their forecasts for a September reduction.

Powell will continue testimony this week before Congress on late Wednesday before the House Financial Services Committee. His remarks come ahead of key inflation data due out later this week, with the June consumer price index on Thursday and the producer price index on Friday. Nvidia shares were up about 2.2% after KeyBanc hiked its price target on the chipmaker to USD180, implying upside of 40% from Monday’s close. A lack of market breadth kept the S&P 500′s gains in check, however. Shares of McDonald’s and Microsoft slipped 1% and 1.6%, respectively.

Source: TA Research - 10 Jul 2023