TA Sector Research

Daily Brief - 18 Apr 2024

Publish date: Thu, 18 Apr 2024, 10:16 AM

Oil & Gas Stocks Attract Buyers on Middle East Tensions

The local market staged a mild rebound Wednesday, led by construction, technology, healthcare and oil & gas stocks, as investors returned to bargain hunt after the recent price corrections. The FBM KLCI rose 5.42 points to settle at 1,540.42, off an intra-day low of 1,532.95 and high of 1,541.88, as gainers led losers 717 to 318 on reduced turnover of 3.45bn shares worth RM2.67bn.

Supports at 1,533/1,512; Resistance at 1,565/1,580

While the market should consolidate on concerns strong US growth and inflation could keep interest rates higher for longer, oil & gas related stocks should see buying support as geopolitical risks in the Middle East stay elevated. Immediate index supports are at 1,533 and 1,512, 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 Velesto & Wasco

Velesto will need breakout confirmation above the 28/2/24 high (31.5sen) to extend recovery towards the 123.6%FP (37sen) and 138.2%FP (41sen) ahead, with downside cushioned by the 200-day ma (25sen). Meanwhile, Wasco need to overcome the 150%FP (RM1.36) decisively to enhance upside potential towards the 161.8%FP (RM1.42) and 176.4%FP (RM1.51) going forward, while the 100-day ma (RM1.13) should provide strong uptrend support.

Most Asian Markets Fell on Hawkish Powell Comments

Shares were mostly lower in Asia on Wednesday as traders digested latest remarks from the world's most powerful central banker on U.S. rate cuts this year. Fed Chair Jerome Powell said recent inflation data, with three months of upside surprises, had not given policymakers enough confidence to ease policy soon. He noted the central bank may need to keep rates higher for longer than previously thought. Markets have already slashed the amount of easing expected this year to fewer than two rate cuts, a sea change from about six cuts predicted at the beginning of the year. The first rate cut is still expected in September, although the market's confidence in that has declined.

Meanwhile, geopolitical tensions in the Middle East are still running high as Israel vowed to respond to Iran's weekend attack despite international calls for restraint. Japan’s Nikkei 225 slipped 1.32% to end at 37,961.80, while the broad-based Topix fell 1.26% and closed at 2,663.15. South Korea’s Kospi dropped 0.98% to 2,584.18, while the small-cap Kosdaq closed nearly unchanged at 833.03. In Australia, the S&P/ASX 200 ended marginally down, finishing at 7,605.60, but the Shanghai composite bucked the regional trend by gaining 2.13% to 3,071.16.

Tech Led Wall Street Lower

Wall Street’s main indexes fell in choppy trade overnight as Nvidia and other struggling technology names put downward pressure on the market. The Dow Jones Industrial Average fell 0.12% to 37,753.31. The S&P lost 0.58% to 5,022.21, while the technology-heavy Nasdaq Composite slid 1.15% to 15,683.37. Weakness among technology stocks weighed on the markets, as reflected by the notable slump by the tech-heavy Nasdaq. Chipmakers bore the brunt of the selling after Dutch chip equipment maker ASML Holding NV’s orders tumbled. Artificial intelligence darling Nvidia stock fell nearly 4%, joining fellow big tech names including Netflix, Meta, Apple and Microsoft in the red. Tech was the worst-performing S&P 500 sector, falling 1.7%.

The lower close on Wall Street also came amid ongoing concerns about the outlook for interest rates following Tuesday's remarks by Federal Reserve Chair Jerome Powell. Overnight performance comes amid a bout of weakness that has marked a reprieve from the strong gains seen in the first quarter and in 2023. The Dow has slid more than 5% in April, while the S&P 500 and Nasdaq Composite have tumbled more than 4%. Travelers tumbled as one of the biggest drags on the S&P 500 and largest on the Dow Industrials after the insurance giant missed Wall Street expectations for first-quarter profit.

Source: TA Research - 18 Apr 2024

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