Upbeat Sentiment on Future US Rate Cuts

Stocks traded sideways on Wednesday with most sectors in consolidation, but the construction sector rose 1.7% given positive news flow on land sales and optimism over infrastructure contracts. The FBM KLCI added 3.96 points to settle at 1,618.38, off an opening low of 1,613.65 and high of 1,620.83, as gainers edged losers 569 to 549 on total turnover of 4.76bn shares worth RM3.71bn.

Resistance at 1,622/1,632; Supports at 1,602/1,595

Market sentiment should stay upbeat with recent news flow boosting the construction and utility sectors on data centre deals, supported further by optimism over future US interest rate cuts due to easing inflation expectations. Immediate index resistance remains at the early June high of 1,622, with the May high of 1,632 and 1,640 as tougher upside hurdles, while immediate supports are at 1,602, 1,595 and 1,571, the respective 30-day, 50-day and 100-day moving average levels.

Bargain Duopharma & Pharmaniaga

Duopharma will need breakout confirmation above the 50%FR (RM1.32) to boost upside momentum towards the 61.8%FR (RM1.40) and 76.4%FR (RM1.48) ahead, while the 200-day ma (RM1.21) provides strong support cushion. Pharmaniaga need to overcome the 50%FR (45sen) convincingly to enhance upside momentum and aim for the 61.8%FR (51sen) and 76.4%FR (58sen) going forward, with the 23.6%FR (33sen) expected to cushion downside risk.

Asian Markets Mixed as Traders Digest Economic Data

Stocks in Asia were mixed on Wednesday as traders digest economic data from the region and comments from U.S. Federal Reserve Chairman Jerome Powell overnight. Data showed China's consumer prices grew for a fifth month in June but missed expectations, while the producer price deflation persisted, as government support measures set a bumpy recovery in motion for the world's second-largest economy. Elsewhere in Asia, Japan's wholesale inflation accelerated in June as the yen's decline pushed up the cost of raw material imports, keeping alive market expectations for a near-term interest rate hike by the central bank.

In stateside, Jerome Powell appeared to show increasing faith that inflation would return to the Fed's target and pointed to risks to the job market and the economy if interest rates stay too high for too long. The Nikkei-225 gained 0.61% to 41,831.99, while the broad-based Topix also added 0.47% to 2,909.20. South Korea’s Kospi close nearly unchanged at 2,867.99 and Australia’s S&P/ASX 200 fell 0.16% to 7,816.80. The Shanghai Composite Index fell 0.68% to 2,939.36 while Hong Kong’s Hang Seng index slipped 0.29% to 17,471.67.

S&P 500 Tops Historic 5600 Mark on Rate-Cut Optimism

The S&P 500 climbed to a fresh record high overnight, breaking above 5,600 for the first time, as Jerome Powell's remarks to the Senate and House buoyed rate-cut hopes and Big Tech stocks piled on the gains. The Dow Jones Industrial Average rose 1.09% to close at 39,721.36. The S&P 500 gained 1.02% to finish the session at 5,633.91, and the Nasdaq Composite jumped 1.18% to 18,647.45. In his semiannual testimony to Congress, Powell hinted the stage is almost set for lowering interest rates from two-decade highs, pointing to a cooling in inflation and in the jobs market. Powell also warned of the risk that leaving interest rates at an elevated level for too long could jeopardize economic growth.

Traders are also waiting for June's Consumer Price Index report, due out on late Thursday, and the Producer Price Index report, which comes on Friday, and expect the data to add to optimism that the Fed will be able to cut rates this year. Chip stocks were among the largest winners of the session. Stock in Taiwan Semiconductor added nearly 3.5% after revenue from April to June came in ahead of Wall Street estimates. Peer chip firms Qualcomm and Broadcom traded marginally higher, while the AI darling Nvidia advanced more than 2%. Apple, Microsoft and Google each gained more than 1%.

Source: TA Research - 11 Jul 2024