Sideways as Market Await ECB and US Rate Cues

Blue chips closed lower Wednesday after the previous day’s strong rebound encouraged profit-taking in energy, plantation and consumer heavyweights, as investors assess key labour market data for cues on the interest rate path ahead for the US. The FBM KLCI shed 6.87 points to end at the day’s low of 1,608.53, off an early high of 1,622.65, as losers edged gainers 599 to 547 on lower turnover of 4.28bn shares worth RM3.4bn.

Resistance at 1,640/1,660; Supports at 1,597/1,583

The local market should trade sideways as investors await the ECB decision on interest rates and more US jobs data for signs on the probable direction for US interest rates. Immediate index resistance stays at 1,640, with 1,660 and then 1,680 as tougher upside hurdles ahead. Immediate uptrend supports will be 1,597, then 1,583 and 1,553, the respective 30-day, 50- day and 100-day moving averages.

Bargain Supermax & Top Glove

Supermax should rebuild support at current levels pending rebound, with a breakout above the mid Bollinger band (92sen) to aim for the upper band (RM1.03) and RM1.10 ahead, while the 200-day ma (87sen) and 85sen cushion downside. Top Glove will need breakout momentum above the mid Bollinger band (RM1.07) to sustain upside and target RM1.18, RM1.25 and RM1.31, with the 30-day ma (RM1.00), 50-day ma (93sen) and 100-day ma (90sen) acting as stronger chart supports.

Asian Markets End Mixed as Traders Digest U.S. Jobs Data

Asian markets traded mixed Wednesday as traders digest U.S. jobs data for clues on the Federal Reserve's interest rate path ahead of a crucial payroll report this week. Data overnight showed U.S. job openings fell more than expected in April to the lowest level in more than three years, a sign that labour market conditions are softening. The data emboldened bets of rate cuts this year, with markets pricing in 45 basis points of easing. Markets are shifting focus to a slew of labour market readings this week, including Friday’s US jobs report, for further clues on when the Fed will deploy rate cuts. On economic front, first-quarter gross domestic product from Australia came in at 1.1% year-over-year, slightly below a Reuter’s poll expectation of 1.2%.

Separately, real wages in Japan fell for a 25th straight month in April, potentially stifling the Bank of Japan’s plans to raise interest rates and realize its “virtuous cycle” of increasing wages and prices. Australia’s S&P/ASX 200 closed 0.41% higher at 7,759.40, while South Korea’s Kospi jumped 1.03% to 2,689.50. In Japan, the Nikkei 225 dropped 0.89% to close at 38,490.17, while the broader Topix shed 1.41% to end at 2,748.22. The Shanghai Composite Index fell 0.83% to 3,065.40 and Hong Kong’s Hang Seng index slipped 0.1% to 18,424.96.

S&P 500, Nasdaq Hit Record Highs on Nvidia Rally

The S&P 500 and Nasdaq indices closed at fresh record highs overnight, underpinned by Nvidia-led strength in tech as signs of further cooling in the labour market lifted hopes that the Federal Reserve will cut interest rates later this year. The Dow Jones Industrial Average rose 0.25% to finish the session at 38,807.33. The S&P 500 gained 1.18% to end at 5,354.03, its 25th record close of 2024. The Nasdaq Composite jumped 1.96% to 17,187.90, its 13th record finish of the year. Tech was the clear leader, with Nvidia soaring more than 5% as its market cap crossed USD3 trillion for the first time ever. Nvidia finished the session above Apple's market cap, supplanting it as the US stock market's second most valuable company.

The strength on Wall Street also came as a report from payroll processor ADP showing private sector job growth in the U.S. slowed by more than expected in the month of May added to optimism about the outlook for interest rates. Treasury yields moved lower following the release of the jobs data, with the ten-year yield falling to its lowest levels in two months. Double-digit gains in both CrowdStrike and Hewlett Packard Enterprises after positive earnings also contributed to the rally in tech. Fellow technology and artificial intelligence play Meta Platforms added 3.8%.

Source: TA Research - 6 Jun 2024