Sideways on Uncertain US Rate Outlook

Bursa Malaysia shares eased for profit-taking consolidation on Monday, as overbought momentum and the cloudy US interest rate outlook encouraged investors to lighten trading commitments. The FBM KLCI eased 1.13 points to close at 1,618.27, off an early high of 1,622.4 and low of 1,617.98, as losers beat gainers 682 to 529 on total turnover of 5.64bn shares worth RM3.92bn.

Resistance at 1,640/1,660; Supports at 1,600/1,592

Stocks should trade sideways with downward bias in the near-term, given uncertainty over the path ahead for U.S. interest rates as policymakers struggle with sticky inflation and robust economic growth numbers. 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

1,592, 1,576 and 1,546, the respective rising 30-day, 50-day and 100-day moving averages, acting as stronger supports.

Bargain Dialog & DNEX

Dialog will need sustained buying momentum for a successful challenge of the 25/1/23 peak (RM2.73), with a confirmed breakout to target the 123.6%FP (RM2.97) and 138.2%FP (RM3.12) going forward, while uptrend support will be from the rising 50-day ma (RM2.37). DNEX need breakout confirmation above 50sen to aim for the 38.2%FR (55sen) and 50%FR (62sen) ahead, with key chart support from the 200-day ma (40sen) limiting downside risk.

Asian Markets Higher Ahead of Key Economic Data

Asian markets traded higher on Monday as traders braced for key economic data from China, Australia and Japan due later this week. Traders will pay close attention to China industrial profits and PMI data to help gauge the health of the world’s second largest economy. A swath of inflation prints from Australia to Japan and the Eurozone are also due as traders finesse bets on the outlook for monetary policy. Meanwhile, Wall Street got a degree of relief as University of Michigan data showed consumers expect prices to climb at a 3.3% annual rate over the next year, down from the 3.5% expected earlier in the month. Later this week, the Federal Reserve’s first-line inflation gauge is due on Friday and is set to show some modest relief from stubborn price pressures.

Federal Reserve Chair Jerome Powell and his colleagues have stressed the need for more evidence that inflation is on a sustained path to their 2% goal before cutting the benchmark interest rate, which has been at a two-decade high since July. South Korea’s Kospi jumped 1.32% to 2,722.99 and the small-cap Kosdaq gained 1.02% to 847.99. Japan’s Nikkei 225 rose 0.66% to 38,900.02 and the broad-based Topix added 0.84% to 2,765.45. Australia’s the S&P/ASX 200 also gained 0.79% to 7,788.30, while the Shanghai Composite Index added 1.14% to 3,124.04.

European Markets End Higher on Rate Cut Hopes

Major European markets edged higher in thin trading overnight after European Central Bank officials signaled policy maker could consider successive rate cuts starting next month. The pan European STOXX 600 gained 0.32% to 522.21. The German DAX index rose 0.44% to 18,774.71 and France's CAC 40 added 0.46% to 8,132.49. Trading volumes were thin due to holidays in the U.K. and U.S. for the late May bank holiday and Memorial Day, respectively. Chief Economist Philip Lane said the central will have to keep policy restrictive through 2024, even after cutting interest rates next month. Traders are betting that the ECB will lower its benchmark deposit rate by a quarter percentage point from its record high of 4% at next week’s meeting after eurozone inflation fell close to the bank’s 2% target.

On economic news, German business sentiment remained unchanged in May, survey results from the ifo Institute showed earlier today. The business climate index posted 89.3 in May, unchanged from April. The score was forecast to improve to 90.3 in May. The score for April was revised down from 89.4. Euro zone May consumer prices data for May could provide additional clues on whether the European Central Bank will cut interest rates next week. Amongst individual stocks, Alstom gained 5.6% after the French train maker set terms of a planned 1billion-euro rights issue as part of broader actions to repair its finances.

Source: TA Research - 28 May 2024