Sideways Ahead of Key US Inflation Data

Stocks stayed range bound on Thursday, as investor caution prevailed with high US Treasury and European bond yields pointing toward inflationary pressures remaining high for a period. The FBM KLCI ended 1.09 points down at 1,604.26, after ranging between opening low of 1,602.32 and high of 1,608.84, as losers edged gainers 620 to 577 on improved trade totalling 5.33bn shares worth RM3.99bn.

Supports at 1,600/1,595; Resistance at 1,640/1,660

The local market should trade sideways with downward bias ahead of the weekend as investors remain on inflation watch ahead of the release of the key US core PCE index for leads. 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 1,595, 1,580 and 1,550, the respective rising 30-day, 50-day and 100-day moving averages, acting as stronger supports.

Bargain Public Bank & RHB Bank

Public Bank looks attractive to bargain at current depressed levels for oversold rebound towards the 200-day ma (RM4.23), with a decisive breakout to aim for the 76.4%FR (RM4.34) and 21/2/24 high (RM4.52) going forward, while the 23.6%FR (RM3.95) cushions downside. RHB Bank is also attractive to bargain at present levels, ahead of breakout above the 200-day ma (RM5.58) which should aid further gain towards the 38.2%FR (RM5.68) and 50%FR (RM5.80) ahead, while the lower Bollinger band (RM5.45) and 2/6/23 pivot low (RM5.29) limits downside risk.

Asian Markets Tumble as Timing of U.S. Rate Cuts Weighed

Stocks in Asian markets fell on Thursday, as bond yields continued to spike amid uncertainty about the US Fed's interest-rate moves ahead of key inflation data later in the week. The yield on the benchmark 10-year U.S. Treasury note hit four-week highs at 4.6%, extending Tuesday's gains, after weak debt auctions. European bonds also tumbled, sending yields to multi-month highs after inflation in Germany quickened more than expected, denting bets on a faster pace of rate cuts. Separately, a Fed survey showed U.S. economic activity continued to expand from early April through mid-May but firms grew more pessimistic about the future while inflation increased at a modest pace. The report on US personal income and spending in the month of April, due on Friday, includes readings on inflation said to be preferred by the US Fed.

Meanwhile, Japan and South Korea will release industrial production figures on Friday, and China will release the official purchasing manager’s index for May. Inflation data for Japan’s capital city of Tokyo will also be released. Australia’s the S&P/ASX 200 fell 0.49% to 7,628.20, while South Korea’s Kospi lost 1.56% to 2,635.44. Japan’s Nikkei 225 dropped 1.30% to end at 38,054.13 and the broad-based Topix fell 0.56% to 2,726.20. The Shanghai Composite Index dipped 0.62% to 3,091.68 while Hong Kong’s Hang Seng index dropped 1.34% to 18,230.19.

Tech Stock Slide Drag Wall Street Lower

Wall Street’s main indexes finished lower overnight, with technology shares leading declines after a disappointing Salesforce forecast. The Dow Jones Industrial Average slid 0.86% to

38,111.48. The S&P 500 lost 0.60% to close at 5,235.48, while the Nasdaq Composite dipped 1.08% to 16,737.08. Salesforce’s stock suffers its biggest drop in two decades after the business-software provider cut its outlook for subscription and support revenue, citing cooling demand from its customers. The software maker's shares slid nearly 20%. Artificial intelligence darling Nvidia also slid more than 3%, notching its first negative session following its blockbuster earnings report last week. Concerns about the outlook for interest rates also continued to weigh on the markets ahead of the release of closely watched inflation data on late Friday.

The Fed’s first-line inflation gauge is about to show some modest relief from stubborn price pressures, corroborating central bankers’ prudence about the timing of interest-rate cuts. The data could have a significant impact on the outlook for interest rates, as Fed officials have repeatedly said they need "greater confidence" inflation is slowing before they will consider cutting rates. Traders also digested data showing the economy had grown slower than previously expected in the first quarter. A separate report showed weekly jobless claims rose more than expected.

Source: TA Research - 31 May 2024