Drift Lower in Absence of Local Leads

Blue chips ended near session lows on Wednesday, as investors stay sidelined pending firmer local market leads and ahead of the keenly anticipated US jobs data by the end of the week. The FBM KLCI slipped 3.64 points to close at 1,445.82, off an early high of 1,452.07 and low of 1,444.63, as losers beat gainers 452 to 365 on slower trade totalling 2.79bn shares worth RM1.81bn.

Better Support at 1,430/1,400; Resistance at 1,465/1,470

The local market should continue to drift lower given the absence of significant domestic leads, and as investors await more solid signs of cooling inflation which could strengthen the case for interest rate cuts next year. Better index chart supports are at 1,430, and 1,400/1,390, while the end June low of 1,370 will act as crucial support. Immediate resistance is still at 1,465/1,470, with the 1,490/1,500 area acting as tougher upside hurdle.

Bargain Maxis & TM

Maxis is deemed attractive to bargain at current levels for recovery to the 76.4%FR (RM4.14), with a breakout to aim for the 16/6/23 high (RM4.46), and next major hurdle at the 123.6%FP (RM4.78), while the 50%FR (RM3.78) cushions downside. TM will need confirmed breakout above the 76.4%FR (RM5.47) to enhance upside momentum towards the 25/8/22 peak (RM5.80), with next hurdle from the 123.6%FP (RM6.13), while downside is cushioned by the 200-day ma (RM4.95).

Asian Markets Advanced on Rate Optimism

Asian markets rose on Wednesday as the softer than expected U.S. jobs figures reinforced speculation the Federal Reserve will cut interest rates next year to prevent a recession. The cooling U.S. labor market data cemented views that the Federal Reserve is done hiking rates, with bets on a first cut coming by March now at around 64%, according to the CME Group's Fed-Watch tool. Traders also assessed Australia’s third-quarter GDP numbers, as well as the Reuters Tankan survey for Japan in December. Sentiment at big Japanese manufacturers surged, improving for a second straight month as the auto sector continued to recover from last year's semiconductor shortage and supply chain woes.

Separately, Australia’s economy expanded 2.1% year-on-year in the third quarter, beating expectations from economists polled by Reuters. Japan’s Nikkei 225 popped 2.04% and closed at 33,445.9, and the Topix advanced 1.9% and ended the day at 2,387.2. South Korea’s Kospi inched higher by 0.04% to 2,500.21, while the small-cap Kosdaq climbed 6.16% to 819.54. In Australia, the S&P/ASX 200 rose 1.65%, closing at 7,178.4, while the Shanghai composite index inched down by 0.11% to 2,968.93.

Wall Street Slip as Traders Await Nonfarm Payroll Data

Wall Street’s main indexes fell overnight as traders assessed economic data indicating inflation is falling and awaited further data this week on the state of the labor market. The Dow Jones Industrial Average fell 0.19% to 36,054.43. The S&P lost 0.39% to 4,549.34, while the Nasdaq Composite fell 0.58% to 14,146.71. The market got a morning boost after report from payroll processor ADP showing private sector employment in the U.S. increased by less than expected in the month of November. But the ADP report is just one in a string of laborfocused data releases expected over the course of the week. Traders will monitor jobless claims numbers on late Thursday before turning attention to widely followed data on nonfarm payrolls, wages and the unemployment rate due Friday.

Buying interest has waned over the course of the session, however, as trader’s express concerns expectations the Fed could pivot to cutting rates as early as March 2024 has led to overbought conditions. Declines in energy stocks also weighed on the major indexes, with oil prices dropping 4% as a larger-than-expected rise in U.S. gasoline inventories exacerbated worries about fuel demand. In other U.S. economic data, the U.S. trade deficit widened in October to a three-month high of USD64.3 billion due to a decline in exports, according to government data published overnight.

Source: TA Research - 7 Dec 2023