TA Sector Research

Daily Brief - 17 May 2024

Publish date: Fri, 17 May 2024, 09:46 AM

Softer US Consumer Inflation Support Gains

Blue chips rose on Thursday, led by technology, construction and property stocks, matching regional gains after lower-than-expected US consumer prices raised hopes the Fed will cut rates later this year. The FBM KLCI climbed 7.88 points to close at 1,611.11, off an opening low of 1,604.38 and high of 1,611.57, as gainers led losers 720 to 492 on strong turnover of 6.05bn shares worth RM4.35bn.

Resistance at 1,620/1,640; Supports at 1,578/1,564

The local market should find support from regional strength given the softer US consumer inflation data which increases the likelihood for interest rate cuts, while rubber glove stocks pause for profit-taking breather after recent sharp gains. Immediate resistance for the index stays at 1,620, with stronger upside hurdles seen at 1,640 and then 1,660. Immediate uptrend supports will be at 1,578, 1,564 and 1,536, which are the respective rising 30-day, 50-day and 100-day moving averages.

Bargain Gamuda & Sunway Construction

Gamuda will need sustained strength above the upper Bollinger band (RM5.60) to extend uptrend towards the 123.6%FP (RM5.82) and 138.2%FP (RM6.09) ahead, while the 50-day ma (RM5.24) and 100-day ma (RM5.09) cushion downside. Similarly, Sunway Construction need to climb above the upper Bollinger band (RM3.19) to fuel upside momentum towards the 123.6%FP (RM3.37) and 138.2%FP (RM3.59) going forward, with downside capped by the 50- day ma (RM2.85) and 76.4%FR (RM2.66).

Asian Markets Ends Higher on Soft U.S. Inflation Data

Asian markets finished higher on Thursday, as the latest US inflation data reinforced bets for Federal Reserve interest-rate cuts. U.S. data showed the consumer price index rose by 0.3% in April, below an expected 0.4% gain, raising hopes the Fed can cut rates by 50 basis points this year, with the first quarter-point reduction fully priced for September. Separate retail sales data indicated some softening of the resilient consumer demand that’s been bolstering the economy. The data provided succor to markets after higher-than-expected U.S. producer prices in the first quarter had led to a sharp paring of rate cut bets and even stoked some worries of an additional hike.

On economic data in the region, Japan’s first-quarter GDP contracted at an annualized rate of 2%, more than the 1.5% expected in a Reuters poll. The latest data could likely jeopardize the Bank of Japan’s plans to raise interest rates. Japan’s Nikkei 225 gained 1.39% to end at 38,920.26, while the broader Topix closed 0.24% higher at 2,737.54. South Korea’s Kospi also rose 0.83% to 2,753.00 and small-cap Kosdaq gained 0.95 to 870.37. In Australia, the S&P/ASX 200 index gained 1.65% to close at 7,881.30, and the Hong Kong’s Hang Seng index jumped 1.59% to 19,376.53.

U.S. Stocks Slips as Wall Street Rally Pauses

Wall Street’s major indexes finished modestly lower overnight, retreating from a record run that included the Dow's first ever rise above 40,000 points. The Dow Jones Industrial Average fell 0.10% to close at 39,869.38. The S&P lost 0.21% to 5,297.10, while the Nasdaq Composite dropped 0.26% to 16,698.32. The early strength on Wall Street reflected an extension of the rally seen during Wednesday's session, which came amid optimism about the outlook for interest rates following tamer-than-expected consumer price inflation data. Buying interest waned over the course of the session, however, with traders seemingly pausing to assess the near-term outlook for the markets after the major averages reached new record highs.

Earlier in the day, three Fed officials Cleveland Fed President Loretta Mester, New York Fed President John Williams and Richmond Fed President Thomas Barkin warned of higher-forlonger interest rates while speaking at separate events. That commentary also appeared to take the wind out of stocks' recent rally. It was Walmart that led the Dow’s charge above 40,000 as the world’s biggest retailer popped nearly 7% on strong fiscal first-quarter results. Walmart is now up 21% in 2024.

Source: TA Research - 17 May 2024

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