Sideways With Downward Bias on Inflation Watch

Blue chips ended lower Tuesday on profit-taking due to overbought momentum and caution over the path ahead for US interest rates given the stubbornly high inflation and growth numbers. The FBM KLCI fell 2.45 points to settle at 1,615.82, off an early high of 1,622.93 and low of 1,612.96, as losers beat gainers 824 to 352 on lower turnover of 4.86bn shares worth RM3.79bn.

Resistance at 1,640/1,660; Supports at 1,600/1,594

The local market should extend sideways trade with downward bias as investors assess inflation data from across the region and Europe for cues on the likely interest rate direction towards the year-end. 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 1,594,

1,577 and 1,547, the respective rising 30-day, 50-day and 100-day moving averages, acting as stronger supports.

Bargain Sime Darby & Tenaga

Sime Darby need to overcome the 138.2%FP (RM3.00) decisively to extend uptrend and aim for the 150%FP (RM3.09) and 161.8%FP (RM3.18) ahead, while uptrend support from the rising 50-day ma (RM2.76) cushion downside. Tenaga will need to sustain breakout above the 161.8%FP (RM13.53) to enhance upside momentum and target the 176.4%FP (RM13.95) and 200%FP (RM14.61) going forward, with uptrend support from the rising 30-day ma (RM12.26) and 50-day ma (RM11.96) capping downside risk.

Asian Markets Wobble Ahead of Inflation Data

Stocks in Asian markets fell on Tuesday ahead of a swath of inflation prints that’s expected to influence the direction of global monetary policy. Traders will this week be studying fresh inflation data from Australia to Japan, the euro region and the US. A slew of European Central Bank officials said the ECB has room to cut interest rates as inflation slows, underscoring expectations for a rate cut on June 6. With debate now shifting to subsequent moves, markets have fully priced in two rates cuts by October this year. The big risk events this week are not due until Friday when U.S. figures on core personal consumption expenditures (PCE), the Federal Reserve's preferred measure of inflation and euro zone inflation data will set the trading tone. Meanwhile, John Williams, Lisa Cook, Neel Kashkari and Lorie Logan are among US central bankers due to speak this week.

On economic front, Australia’s retail sales growth missed Reuters’ poll estimates. Sales growth in April rose 0.1% compared with March. Australia’s the S&P/ASX 200 closed 0.28% lower at 7,766.70, while South Korea’s Kospi ended flat at 2,722.85. Japan’s Nikkei 225 dipped 0.11% to end at 38,855.37 and the broad-based Topix closed marginally higher at 2,768.50. The Shanghai Composite Index also fell 0.46% to 3,109.57 while Hong Kong’s Hang Seng index dipped 6.19 points to 18,821.16.

Nasdaq Breached 17,000 Mark on Nvidia Rally

The Nasdaq Composite closed at a record level overnight, as Nvidia’s ascent lifted the technology-heavy index in an otherwise lacklustre trading day. The Nasdaq Composite traded up 0.59% to 17,019.88, eclipsing the 17,000 level for the first time ever. The S&P 500 inched up just 0.02% to 5,306.04. The Dow Jones Industrial Average slipped 0.55% to end at 38,852.86. The continued advance by the Nasdaq came amid a sharp increase by shares of Nvidia, with the AI darling surging by 7.1% to a record closing high. While Nvidia’s rally disguised troubles in the broader market, the blue-chip Dow was weighed down by a drop in Merck and other health names. Overall trading activity remained somewhat subdued, however, as traders looked ahead to the release of key inflation data later this week.

The U.S. core Personal Consumption Expenditures Price Index report for April is due later this week. The Fed's preferred inflation barometer is expected to hold steady on a monthly basis. Treasury yields jumped after a reading on consumer confidence came in higher than expected and auctions of 2-year and 5-year notes saw soft demand. The yield on the benchmark 10-year note was back above 4.5% after settling Friday at 4.471%. Meanwhile, Minneapolis Federal Reserve President Neel Kashkari said he wants to see “many more months” of data pointing to easing inflation before cutting rates. He also said he would not rule out further rate hikes if price pressures tick up again.

Source: TA Research - 29 May 2024