TA Sector Research

Daily Brief - 24 May 2024

Publish date: Fri, 24 May 2024, 11:12 AM

Range Bound on US Rate Cut Uncertainty

Stocks rebounded on Thursday, as investors returned to bargain hunt transport, utility and oil & gas heavyweights on economic recovery optimism. The FBM KLCI rose 7.09 points to close at 1,629.18, off an opening low of 1,620.66 and high of 1,632.79, as gainers led losers 732 to 521 on robust trade totalling 6.16bn shares worth RM4.68bn.

Resistance at 1,640/1,660; Supports at 1,600/1,589

The local market should stage profit-taking correction ahead of the weekend, following the overnight US correction on uncertainty over the path ahead for U.S. interest rates. Immediate index resistance stays at 1,640, with 1,660 and then 1,680 as tougher upside hurdles ahead. Immediate uptrend support remains at 1,600, with 1,589, 1,572 and 1,543, the respective rising 30-day, 50-day and 100-day moving averages, acting as strong supports.

Bargain Globetronics & Inari

Globetronics need to overcome the 50-day ma (RM1.33) to enhance upside potential towards the 50%FR (RM1.41), with next hurdle coming from the 61.8%FR (RM1.51), and downside cushioned by the 23.6%FR (RM1.19). Inari will need confirmed breakout above the 22/2/24

high (RM3.35) to fuel further upside momentum and aim for the 123.6%FP (RM3.63) and 138.2%FP (RM3.80) going forward, while the 200-day ma (RM3.04) cushions downside.

Asian Markets End Lower on Hawkish Fed Minutes

Most Asian markets traded lower Thursday, as traders reacted to the minutes of the US Fed's recent monetary policy meeting that suggested officials expect to take patient approach to monetary easing amid sticky inflation. The meeting participants highlighted disappointing readings on inflation over the first quarter and indicators pointing to strong economic momentum. They subsequently assessed that it would take longer than previously anticipated for them to gain "greater confidence" inflation is moving sustainably toward 2%. Meanwhile, a hot UK inflation print and a sobering assessment of New Zealand's inflation problems from the country's central bank have also caused traders to pare their bets of the pace and scale of global rate cuts expected this year.

On economic news, South Korea’s central bank held its benchmark policy rate at 3.5% as estimated in a Reuter’s poll. Separately, the Bank of Japan kept its policy rate unchanged last month, holding its benchmark policy rate at 0%-0.1%. BOJ had said it would continue to conduct bond purchases in line with its March decision. South Korea’s Kospi fell 0.06% to 2,721.81, and Australia’s the S&P/ASX 200 lost 0.46% to 7,811.80. In mainland, the Shanghai Composite Index dropped 1.33% to 3,116.39, while Hong Kong’s Hang Seng index shed 1.7% to 18,686.71. But, Japan’s Nikkei 225 bucked the regional trend by gaining 1.26% to 39,103.22 and the broad-based Topix added 0.64% to 2,754.75.

Wall Street Tumble as Rate Jitters Weigh

Wall Street’s main indexes finished lower overnight as enthusiasm over Nvidia Corp's quarterly results faded and robust economic data fueled concerns over higher-for-longer monetary policy. The Dow Jones Industrial Average dropped 1.53% to 39,065.26. The S&P 500 fell 0.74%, closing at 5,267.84, and the Nasdaq Composite lost 0.39% to end at 16,736.03. Chipmaker and artificial intelligence darling Nvidia popped more than 9% to top USD1,000 for the first time after the AI bellwether blew past Wall Street's sky-high forecasts for first quarter earnings and announcing a 10-for-1 stock split. However, buying interest waned shortly as concerns about the outlook for interest rates continue to hang over the broader markets after data overnight suggested U.S. business activity has picked up and the labor market remains tight, supporting the Fed's "higher for longer" narrative.

Traders are currently pricing just a 51% chance the Fed will cut rates in its September meeting, down from 58% a day ago and nearly 68% in the prior week, according to the CME Fed-Watch Tool. Boeing weighed on the Dow, dropping more than 7.5% after the beleaguered aircraft manufacturer said its cash flows were worse than expected this year. That caused concern amongst investors that its debt ratings could be classified as junk bonds. McDonald’s, Walt Disney, Johnson & Johnson and Travelers were the next biggest losers, as each slipped more than 2%.

Source: TA Research - 24 May 2024

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