Steady on Hope Interest Rates Have Peaked

Blue chips firmed on Thursday, led by oil & gas, technology and consumer heavyweights, rising in line with the region in hopes the US Federal Reserve may be done with interest rate hikes. The FBM KLCI closed up 4.44 points at 1,439.77, off an opening low of 1,435.86 and high of 1,441.35, as gainers led losers 575 to 300 on a stronger turnover of 3.38bn shares worth RM1.93bn.

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

Stocks should remain steady ahead of the weekend in hopes that the U.S. central bank's pause in rate hikes may extend till year-end and encourage Bank Negara to stay pat on interest rates. 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 Hartalega & Kossan Rubber

Hartalega remains in a base building phase, pending breakout confirmation above the 50%FR (RM2.21) to aim for 61.8%FR (RM2.40) and 76.4%FR (RM2.63) going forward, while key support from the 200-day ma (RM1.97) imply limited downside risk. Kossan Rubber is also building support at current levels, pending a decisive breakout above the 50%FR (RM1.40) to target 61.8%FR (RM1.53) and 76.4%FR (RM1.68) ahead, with the 200-day ma (RM1.29) providing strong support to cushion downside.

Asian Markets Rise on Fed Rate Decision

Stocks were higher in Asia on Thursday, as a hawkish interest-rate hold by the Federal Reserve fuelled hopes that the U.S. central bank is done with rate hikes. The Fed announced that it had decided to hold the policy rate steady in its current 5.25% to 5.50% range. Powell, in a press conference, said that market borrowing costs would need to be sustainably higher for that to bear on future central bank monetary policy choices. In a policy statement, the U.S. central bank also left the door open to a further increase in borrowing costs, acknowledging the American economy's surprising strength. Markets have priced in a 70% chance that the tightening is over, and rate cuts could amount to 85 basis points next year, beginning as soon as June.

In economic news, data from South Korea showed consumer prices accelerated for the third straight month in October, with the CPI rising 3.8% year-on-year. Separately, Australia’s September goods trade surplus narrowed to its lowest in 32 months, according to official data. South Korea’s Kospi jumped 1.81% to 2,343.12, and the Kosdaq gained 4.55% to close at 772.84. Japan’s Nikkei 225 also rose 1.10% to 31,949.89, while the Topix index added 0.51% to 2,322.39. In Australia, the ASX 200 closed 0.90% higher at 6,899.70, and Hong Kong’s Hang Seng index gained 0.78% to 17,253.38.

Wall Street Rally on Fed Rate Optimism

Wall Street’s main indexes closed sharply higher overnight as traders bet the Federal Reserve is close to wrapping up its rate-hiking campaign and assessed fresh economic data. The Dow Jones Industrial Average rose 1.70% to settle at 33,839.08, The S&P 500 added 1.89% and closed at 4,317.78, while the Nasdaq Composite jumped 1.78% and settled at 13,294.19. The extended rally on Wall Street came amid optimism about the outlook for interest rates following the Federal Reserve's monetary policy announcement on Wednesday. The Fed left interest rates unchanged for the third time in the past four meetings, leading to optimism that the central bank is done raising interest rates.

Meanwhile, the latest economic data also added to the optimism about rates, with the Labor Department releasing a report showing an unexpected uptick in first-time claims for U.S. unemployment benefits in the week ended October 28th. Traders are now pricing in an 85% chance there will be no more Fed hikes this year, compared with a 59% probability the day before its policymakers' meeting, according to the CME Fed-Watch Tool. All 11 major S&P 500 sectors rose, led by energy and rate-sensitive real estate, with gains of more than 3% each.

Source: TA Research - 3 Nov 2023