TA Sector Research

Daily Brief - 19 Apr 2024

Publish date: Fri, 19 Apr 2024, 10:39 AM

Consolidate as High Inflation and Rate Worries Check Gains

Stocks managed to sustain moderate gains on Thursday, as investors returned to nibble amid signs of stability in key regional currencies after the outlook for US interest rates being kept higher for longer due to sticky inflation was partly discounted. The FBM KLCI added 4.34 points to close at 1,544.76, off an early low of 1,538.68 and high of 1,548.46, as gainers led losers 570 to 469 on improved turnover of 3.82bn shares worth RM2.61bn.

Supports at 1,534/1,513; Resistance at 1,565/1,580

The local market should extend consolidation ahead of the weekend, but lingering concerns over strong US growth and inflation to keep interest rates higher for longer could check gains in the immediate term. Immediate index supports are at 1,534 and 1,513, 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 Ekovest & IWCity

Any further weakness on Ekovest should attract buyers ahead of rebound upside towards the 50%FR (49sen), with a confirmed breakout to aim for the 61.8%FR (52sen) and 76.4%FR (56sen), while the 23.6%FR (41sen) cushions downside. IWCity will need convincing breakout above the 61.8%FR (83sen) to fuel further upside momentum towards the 76.4%FR (91sen), with next hurdle seen from the 8/1/24 peak (RM1.03), while the 200-day ma (66sen) provides good uptrend support.

Bargain Hunting Lift Asian Markets

Stocks in Asia rose Thursday as traders indulged in bargain hunting after the recent sharp selloff and the pushback from authorities against a stronger dollar helped stabilize currencies in the region. Traders hunted bargains following a recent market decline triggered by diminished hope for the US Federal Reserve's rate cut. Meanwhile, the yen and won climbed against the dollar following a joint statement from US Treasury Secretary Janet Yellen alongside the finance ministers of Japan and South Korea that noted “serious concerns” about the depreciation of the two Asian currencies. A global gauge of emerging market currencies was heading for second day of gains, suggesting some stability after hitting their lowest level for the year this week.

On economic news, Australia's headline unemployment rate increased slightly to 3.8 per cent in March, after employment fell by 7,000 people and unemployment rose by 21,000 people. The small drop in employment led to the unemployment rate lifting 0.1 percentage points, up from 3.7% in February. Japan’s Nikkei 225 gained 0.31% to end at 38,079.70, while the broadbased Topix added 0.54% to close at 2,677.45. South Korea’s Kospi also jumped 1.95% to 2,634.70, while the small-cap Kosdaq added 2.72% at 855.67. In Australia, the S&P/ASX 200 gained 0.48% to 7,642.10, and the Shanghai added 0.09% to 3,074.22.

Wall Street Subdued on Lingering Concerns Over Interest Rates

Wall Street’s main indexes were subdued overnight as traders continued to adjust to the idea that interest rates may not come down this year. The Dow Jones Industrial Average inched up 0.06% to finish at 37,775.38. The S&P lost 0.22% to 5,011.12, while the Nasdaq Composite dropped 0.52% to 15,601.50. All three major U.S. stock indexes wavered throughout the session, as traders have been forced to rethink their assumptions over the past two weeks in response to strong economic data and remarks by Fed officials. Traders are still recalibrating what 'higher for longer' means and whether or not there will be any interest rate cut at all this year from the Fed. Meanwhile, New York Fed President John Williams, citing economic strength, said he does not see a convincing case for cutting the central bank's policy rate now. A Reuters poll of 100 economists indicated the Fed will implement its first rate cut in September, and cut perhaps once more this year.

Potentially adding to the interest rate worries, the Philadelphia Federal Reserve released a report showing a considerable acceleration in the pace of growth in regional manufacturing activity in the month of April. The Labor Department also released a report showing firsttime claims for U.S. unemployment benefits remained flat in the week ended April 13th. A Reuters poll of 100 economists indicated the Fed will implement its first rate cut in September, and cut perhaps once more this year. Las Vegas Sands dropped 8.66% as the worst S&P performer despite beating quarterly expectations, as multiple brokerages cut their price target on the stock.

Source: TA Research - 19 Apr 2024

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