TA Sector Research

Daily Brief - 17 Apr 2024

Publish date: Wed, 17 Apr 2024, 10:30 AM

Extend Consolidation as Middle East Tensions Escalate

Stocks sustained falls on Tuesday following strong March US retail sales, which lowered the case for earlier interest rate cuts and as Israel contemplated response to Iran’s weekend aerial military strikes. The FBM KLCI dipped 7.53 points to close at 1,535, off an early high of 1,541.59 and low of 1,532.49, as losers trashed gainers 1,139 to 173 on higher turnover of 4.93bn shares worth RM3.72bn.

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

The local market should extend profit-taking consolidation given the elevated Middle East geopolitical tensions as Israel weighs a military response to Iran’s air strikes, and strong US growth which signalled interest rate cuts may be delayed. Immediate index supports are at 1,533 and 1,511, the respective 50-day and 100-day moving averages, with better support at 1,500. Overhead resistance will be at the recent high of 1,565, with stronger upside hurdles seen at 1,580 and 1,600.

Bargain DNEX & Hibiscus

DNEX need to overcome the 200-day ma (41sen) and 23.6%FR (46sen) convincingly to boost upside momentum towards the 38.2%FR (55sen) and 50%FR (62sen) ahead, with downside cushioned by good chart supports at 34sen and the 18/1/24 low (31.5sen). Hibiscus will require decisive breakout above the 61.8%FR (RM2.91) to enhance upside potential towards the 76.4%FR (RM3.15) and 18/5/22 peak (RM3.55) going forward, while the 200-day ma (RM2.50) provides strong downside cushion.

Asian Markets Sink as Rate Woes Persist

Stocks in Asia ended sharply lower on Tuesday as stronger-than-expected U.S. retail sales for March further reinforced expectations that the Federal Reserve is unlikely to be in a rush to cut interest rates this year. U.S. 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. Traders also remained concerned about geopolitical tensions in the Middle-East after media reports suggest that Israel has reviewed military plans for a potential response against Iran. Israeli Defense Minister Yoav Gallant said the country has no choice but to respond to Iran's weekend attack.

On economic news, data showed China's economy grew faster-than-expected in the first quarter, offering some relief to officials as they try to shore up growth in the face of protracted weakness in the property sector and mounting local government debt. Japan’s Nikkei 225 lost 1.94% to close at 38,471.20, while the broad-based Topix was down 2.04% at 2,697.11. South Korea’s Kospi dropped 2.28% to 2,609.63, while the small-cap Kosdaq dropped 2.30% to 832.81. In Australia, the S&P/ASX 200 fell 1.81% to close at 7,612.50, and the Shanghai composite also slid 1.65% to 3,007.07.

Wall Street Mixed After Powell’s Remarks

Stocks ended mixed on Wall Street overnight as traders digested a "higher-for-longer" interest rate mantra from the Federal Reserve. The Dow Jones Industrial Average gained 0.17% to close at 37,798.97. The S&P fell 0.21% to close at 5,051.41, while the Nasdaq Composite lost 0.12% to 15,865.25. Federal Reserve Chair Jerome Powell said recent inflation data has not given policymakers enough confidence to ease credit soon, noting that the U.S. central bank may need to keep rates higher for longer than previously thought. The comments mark Powell’s first acknowledgment yet that sticky inflation data in the first quarter of this year is not showing the progress that the Fed needs to begin easing monetary policy.

However, the Dow was buoyed by UnitedHealth’s rally of more than 5% on the back of better-than-expected revenue for the first quarter. That outweighed fellow Dow member Johnson & Johnson, which fell nearly 2% on the heels of mixed quarterly results. Shares of Morgan Stanley also rose after its first-quarter profit beat estimates on resurging income from investment banking. Meanwhile, tensions in the Middle East were brought back to the boil after Israel vowed to respond to Iran's weekend attack despite international calls for restraint.

Source: TA Research - 17 Apr 2024

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