Consolidation to Persist on US Rate Uncertainty

Blue chips eased into profit-taking consolidation on Thursday, matching the mixed closings on Asian and overnight Wall Street markets due to uncertainty over the interest rate and inflation outlook. The FBM KLCI slipped 3.53 points to end at 1,601.22, off an early high of 1,607.38 and low of 1,599.29, as gainers led losers 601 to 458 on lower turnover of 4.65bn shares worth RM3.13bn.

Resistance at 1,620/1,640; Supports at 1,567/1,555

The local market should extend profit-taking consolidation into the weekend, with uncertainty over the US interest rate direction and inflation outlook to nudge investors to the sidelines. Immediate resistance for the index remains at 1,620, with stronger upside hurdles seen at 1,640 and then 1,660. Key supports will be at 1,567, 1,555 and 1,529, the respective rising 30- day, 50-day and 100-day moving averages.

Bargain AMBank & CIMB

AMBank need sustained breakout above the upper Bollinger band (RM4.27) to boost upside momentum towards the 20/2/24 high (RM4.45), with next hurdle at the 123.6%FP (RM4.69), while uptrend support from the 200-day ma (RM4.00) cushions downside. CIMB need to

overcome the 7/5/24 high (RM6.92) to extend uptrend towards the 123.6%FP (RM7.23) and 138.2%FP (RM7.52), while the 100-day ma (RM6.33) provide good uptrend support.

Asian Markets Finish Mixed on Lingering Rate Concerns

Stocks in Asia ended mixed Thursday, mirroring the mixed cues from Wall Street overnight amid lingering uncertainty about the outlook for interest rates. The big concern among traders and investors is whether inflation is on course to reach the U.S. central bank's 2% target and when Fed Chair Jerome Powell might cut rates. Fed Bank of Boston President Susan Collins signaled Wednesday that interest rates will likely need to be held at a two-decade high for longer than previously thought to damp demand and reduce price pressures. Inflation figures due next week will offer fresh insights about the US economy after employment data out Friday showed the labour market is cooling.

Later in the day, the Bank of England will decide its interest rate policy, with all eyes on the prospects of a June rate cut following the overnight move by Sweden's Riksbank to cut rates, which underlined Europe's divergence from the U.S. Federal Reserve. South Korea’s Kospi retreated from a one-month high, falling 1.20% to 2,712.14, while the small-cap Kosdaq fell 0.26% to 870.15. In Australia, the S&P/ASX 200 dropped 1.06% to 7,721.60, while Japan’s Nikkei 225 fell 0.34% to 38,073.98. The Shanghai composite index gained 0.83% to 3,154.32, and Hong Kong’s Hang Seng index added 1.22% to 18,537.81.

Wall Street Gains as Weekly Jobless Claim Spurs Rate-Cut Bet

Wall Street’s main indexes rose overnight after a larger-than-expected rise in weekly jobless claims data buoyed interest rate cut hopes this year. The Dow Jones Industrial Average jumped 0.85% to close at 39,387.76 and notch its longest win streak since a nine-day run in December. The S&P 500 added 0.51% to close at 5,214.08, while the Nasdaq Composite gained 0.27% and ended at 16,346.26. The strength on Wall Street comes following the release of a Labor Department report showing a much bigger than expected increase by first-time claims for U.S. unemployment benefits in the week ended May 4th. The data has added to recently renewed optimism that the Federal Reserve will lower interest rates in the coming months.

US policymakers are keeping a close eye on labour demand and wage growth as they debate when it might be appropriate to ease policy. In addition to the unemployment data, a bond auction also met with strong demand, which helped drive yields lower overnight. The 10-year Treasury was down more than 2 basis points at 4.461% while the 2-year Treasury yield dipped more than 3 basis points to 4.811%. Meanwhile, in Britain, the Bank of England kept its key interest rate unchanged, but indicated that it is on course to cut rates over the coming months.

Source: TA Research - 10 May 2024