External Concerns to Check Gains

The local benchmark added double-digit gains on Tuesday, as strong buying interest in major banking stocks lift the index higher and in line with firmer regional markets as investors waited for a U.S. inflation report that could shape the Federal Reserve policy. The FBM KLCI surged 19.09 points or 1.26 percent to end at 1,531.37, off an early low of 1,512.63 and high of 1,533.16, as gainers edged losers 634 to 297 on total turnover of 2.1bn shares worth RM2.04bn.

Supports at 1,493/1,482; Resistance at 1,550/1,580

Even as stocks edge higher, underlying caution over the uncertainties over future interest rate hikes should keep buyers in check. Key index supports cushioning downside stays at 1,494, 1,482 and 1,467, the respective 30-day, 50-day and 100-day moving averages, while immediate overhead resistance are revised higher to 1,550, with stronger upside hurdles at 1,580 and 1,618.

Bargain Gamuda & Gadang

A confirmed breakout on Gamuda above the 138.2%FP (RM5.40) would enhance upside momentum for share price to target the 150%FP (RM5.59), with next significant hurdle being the 161%FP (RM5.78). Key retracement support is capped at the 50-day ma (RM4.77). Gadang needs decisive breakout above the upper Bollinger band (41sen) to target the peak of 15/04/22 (44sen) and 123.6%FP (47sen) going forward, while support from the 50%FR (35sen) is padded by the 200-day ma (32sen).

Asian Markets End Higher Ahead of the U.S. Inflation Data

Most Asian markets climbed across the board Tuesday ahead of a key U.S. inflation report that could help shape the Federal Reserve's rates outlook and determine the timing of interest rate cuts. Investor attention this week will be on crucial reports on January's U.S. Consumer Price Index (CPI), due later in the day, and Producer Price Index, scheduled to be released on Friday. Economists polled by Reuters expect CPI to rise 2.9% on a year-on-year basis, down from 3.4% in the previous month, with annual core CPI inflation also expected to slow to 3.7% in January from 3.9% a month earlier. A slew of recent data, led by strength in the labour market, has underlined the resilience of the U.S. economy and pushed traders to scale back expectations of early and deep interest rate cuts from the Fed.

On economic news, Japan’s corporate goods price index rose 0.2% in January, beating the 0.1% expected by economists polled by Reuters. That compares with the revised 0.2% growth rate for December. Traders are still pricing in 111 basis points of cuts this year versus 75 bps of easing projected by the Fed. In Japan, the Nikkei 225 jumped 2.89% to 37,963.97, while the Topix climbed 2.12% to 2,612.03. South Korea’s Kospi also 1.12% as it returned to trade and closed at 2,649.64, with the small-cap Kosdaq rising 2.25% to finish at 845.15. In Australia, the S&P/ASX 200 slipped 0.15% to 7,603.6, marking a third straight day of losses. Markets are closed in China, Hong Kong, Taiwan and Vietnam for Lunar New Year holidays.

Wall Street Sinks on Stubborn Inflation Data

Wall Street’s major indexes tumbled overnight after hotter-than-expected January inflation report threw the financial market into a tailspin and upended trader’s expectations about how soon and by how much the Federal Reserve might start cutting interest rates. The CPI was up 3.1% YoY while the core CPI rose 3.9% YoY. The Dow Jones Industrial Average lost 1.35% to 38,272.75. The S&P 500 fell 1.37% to 4,953.17, while the Nasdaq Composite dropped 1.80% to 15,655.60. The sell-off on Wall Street came following the release of a highly anticipated Labour Department report showing consumer prices in the U.S. increased by slightly more than expected in the month of January. Fed officials have been warning that more time is needed before rate cuts can begin. A hotter-than-expected inflation reading reinforced that cautious view.

Markets are now pricing in a nearly 80% chance the Fed cuts rates in June, dialling back previous bets the central bank would begin cutting rates in May. Treasuries yields have surged in response to the data, with the yield on the benchmark ten-year note reaching its highest levels in two months. Tech shares including Microsoft and Amazon, which have steered the market run to record highs as rates declined, led the losses in trading overnight. Real estate, consumer discretionary, utilities led losses among the 11 major S&P 500 sector indexes, with real estate falling to an over two-month low.

Source: TA Research - 14 Feb 2024