TA Sector Research

Daily Brief - 16 Apr 2024

Publish date: Tue, 16 Apr 2024, 10:39 AM

Consolidate as Middle East Tensions Cloud Sentiment

Bursa Malaysia shares slumped on Monday as geopolitical tensions in the Middle East spiked after Iran’s drone and missile strikes on Israel over the weekend. The FBM KLCI fell 8.51 points to end at the day’s low of 1,542.53, off an early high of 1,548.34, as losers swarmed gainers 993 to 230 on total turnover of 4.28bn shares worth RM3.25bn.

Supports at 1,533/1,511; Resistance at 1,580/1,600

Stocks should stay in profit-taking consolidation mode with sentiment clouded by heightened Middle East geopolitical tensions and risks for elevated inflation, which could force global interest rates to stay higher for longer. Immediate index supports are at 1,533 and 1,511, the respective rising 50-day and 100-day moving averages, with better support at 1,500. Overhead resistance remains at 1,580, with stronger upside hurdles seen at 1,600 and then 1,620.

Bargain Bumi Armada & Dialog

Bumi Armada will need sustained strength above the 76.4%FR (63sen) to fuel upside momentum towards the 7/3/23 peak (73sen), while a confirmed breakout should aim for the 123.6%FP (82sen) ahead, with the 200-day ma (53sen) to cushion downside. Dialog need convincing break above the 76.4%FR (RM2.44) to enhance upward momentum towards the 25/1/23 peak (RM2.68), with next key upside hurdle at the 123.6%FP (RM2.92), while the 200- day ma (RM2.10) limits downside risk.

Asian Markets Slip Amid Israel-Iran Tensions

Asian markets slipped Monday after Iran's retaliatory attack on Israel over the weekend stoked fears of a wider regional conflict and kept traders on edge for what comes next. Iran launched explosive drones and missiles at Israel in retaliation for a suspected Israeli attack on its consulate in Syria on April 1, marking its first direct attack on Israeli territory. The threat of open warfare erupting between the arch Middle East foes and dragging in the United States have left the region on tenterhooks, as U.S. President Joe Biden warned Prime Minister Benjamin Netanyahu the U.S. will not take part in a counter-offensive against Iran. Traders will soon shift to looming economic data as they refine bets on central bank easing cycles, as well as the International Monetary Fund and World Bank spring meetings in Washington.

A slew of Fed policymakers are due to speak this week, including Chair Jerome Powell, who could give further clarity on the future path of U.S. interest rates. Japan’s Nikkei 225 fell 0.74%, paring some losses, to close at 39,232.80, while the broad-based Topix was down 0.23% at 2,753.20. South Korea’s Kospi also slid 0.42% to 2,670.43, while the small-cap Kosdaq dropped 0.94% to 852.42. In Australia, the S&P/ASX 200 fell 0.46% to close at 7,752.50, but the Shanghai composite index bucked the regional trend by gaining 1.26% to 3,057.38.

Wall Street Extend Sell-Off as Treasury Yield Rise

Wall Street’s main indexes extended last week’s sell-off overnight as bond yields jumped after hot retail sales spurred bets the Federal Reserve will be in no rush to cut rates. The Dow Jones Industrial Average lost 0.65% to close at 37,735.11. The S&P 500 slipped 1.20% to finish at 5,061.82, while the Nasdaq Composite tumbled 1.79% to 15,885.02. The yield on the closely followed 10-year Treasury rose above the key 4.6% level in the session and touched its highest point since mid-November. Yields popped after retail sales data for March blew past analyst expectations, provided the latest evidence in the case for the resilience of the American consumer but also suggested the U.S. Federal Reserve could hold off on cutting its key policy rate for longer than previously anticipated.

On the geopolitical front, over the weekend Iran launched a missile and drone attack against Israel in retaliation for a suspected attack on its embassy, and calls for restraint regarding Israel's response appeared to be calming tensions in the region. Apple fell 2.19% as one of the biggest drags on the S&P 500 after data from research firm IDC showed the company's smartphone shipments dropped about 10% in the first quarter of 2024. Salesforce stumbled 7.28% after Reuters reported, citing a source, that the customer relations software maker was in advanced talks to acquire Informatica.

Source: TA Research - 16 Apr 2024

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