Downward Bias on Cautious External Tone

Bursa Malaysia shares drifted lower on Monday, with most investors sidelined amid concerns over potential worsening of the Israel/Hamas conflict, and ahead of key central bank meetings and economic data releases. The FBM KLCI slid 2.7 points to close at 1,439.20, off an early high of 1,441.80 and low of 1,436.98, as losers swarmed gainers 624 to 238 on muted trade totalling 2.81bn shares worth RM1.51bn.

Resistance at 1,450/1,465; Supports at 1,400/1,390

The local market should trade sideways with downward bias given the cautious sentiment amid the ongoing Middle East conflict and ahead of monetary policy updates from key global central bankers. Immediate overhead resistance for the index remains at 1,450, with 1,465/1,470 and the 1,490/1,500 area acting as tougher upside hurdles. Immediate support stays at 1,400, followed by 1,390, with the end June low of 1,370 acting as crucial support.

Bargain MRCB & UEM Sunrise

MRCB needs to overcome the 30-day ma (45sen) decisively to improve upside momentum and aim for the 123.6%FP (48sen) and 138.2%FP (51sen) ahead, while downside is cushioned by the 76.4%FR support (40sen). UEM Sunrise will need to break above the upper Bollinger band (87sen) to target the 123.6%FP (89sen) and 138.2%FP (97sen) going forward, with the lower Bollinger band (71sen) capping downside risk.

Asian Markets Mixed Amid Gaza Conflict

Asian markets were mixed on Monday, as traders kept a wary eye on the situation in the Middle East and braced for key economic data and central bank meetings due this week. Risk appetite was dulled by Israel's push to surround Gaza's main city in a self-declared "second phase" of a three-week war against Iranian-backed Hamas militants. The intensified conflict in the Middle East comes at the start of a week with a slew of potentially market-moving events, including central bank meetings in Japan, US and the UK. Away from the Federal Reserve's latest policy announcement, the economic calendar in the week ahead will bring investors a crucial October jobs report, key readings on manufacturing activity, and an update on job openings.

Strong GDP data and the Fed's preferred inflation measure last week bolstered the case for the Fed to keep rates elevated for an extended period. Japan’s Nikkei 225 slid 0.95% to end the day at 30,696.96, while the Topix lost 1.04% to close at 2,231.24. In Australia, the S&P/ASX 200 slipped 0.79% to 6,772.90, as the country saw a faster than expected rise in its September retail sales. In contrast, South Korea’s Kospi was up 0.34%, ending at 2,310.55 and the smallcap Kosdaq closed up 1.15% at 757.12. The Shanghai composite index rose 0.12% to 3,021.55, and the Hang Seng Index ended flat at 17,401.08.

Wall Street Rally as Traders Digest Earnings Ahead of Fed Meeting

Wall Street’s major indexes rallied overnight as traders digested a fresh batch of quarterly earnings and look ahead to the Federal Reserve's latest policy decision this week. The Dow Jones Industrial Average gained 1.58% to 32,928.96. The S&P 500 jumped 1.20% to finish the session at 4,166.82, while the Nasdaq Composite added 1.16% to 12,789.48. McDonald’s shares gained 2.3% after the fast-food chain's quarterly profit and sales trumped analysts' expectations, while Western Digital shares popped 6% after beating analyst in the fiscal first quarter. Third-quarter earnings season, firing on all cylinders, has reached its halfway point, and 78% have beaten Wall Street estimates, according to LSEG. Analysts now expect, on aggregate, annual third quarter S&P 500 earnings growth of 4.3%, a marked improvement over the 1.6% year-on-year growth seen at the beginning of October.

Meanwhile, the Federal Open Markets Committee is expected to convene for a two-day monetary policy meeting, which is expected to culminate in a decision to let the Fed funds target rate stand at 5.25%-5.50%. Traders will scrutinize the accompanying statement and Fed Chair Jerome Powell's subsequent Q&A session for clues regarding the central bank's path forward with rates. The Bank of England and the Bank of Japan would also be announcing rate decisions this week. Closely watched economic data is on tap this week, culminating in the U.S. Labor Department's October employment report due on Friday.

Source: TA Research - 31 Oct 2023