Consolidate Ahead of Global Central Bank Policy Cues

Blue chips slipped back into profit-taking correction mode again Tuesday, with falls led by healthcare, utility, banking and consumer heavyweights, as investors reduced commitments ahead of key global central bankers’ policy decisions. The FBM KLCI slumped 12.62 points to end at the day’s low of 1,611.94, off an early high of 1,629.37, as losers swarmed gainers 814 to 347 on lower turnover of 4.18bn shares worth RM3.11bn.

Supports at 1,607/1,584; Resistance at 1,638/1,640

The local market should extend consolidation with downward bias, as investors look ahead to major US technology earnings and monetary policy clues from key global central bankers. Immediate index supports are revised lower to 1,607 and 1,584, the respective 50-day and

100-day moving average levels, while immediate resistance remains at the recent high of 1,638, with 1,640 and 1,660 as tougher upside hurdles.

Bargain Maxis & TM

Maxis will need breakout confirmation above the 200-day ma (RM3.67) to drive upside momentum towards the 61.8%FR (RM3.80) and 76.4%FR (RM4.02) ahead, while downside is cushioned by the lower Bollinger band (RM3.42). TM needs to sustain breakout momentum above the recent 16/7/24 high (RM7.19) to target the 123.6%FP (RM7.81) and 138.2%FP (RM8.19) going forward, with major uptrend supports coming from the rising 50-day ma (RM6.69) and 100-day ma (RM6.37).

Asian Markets Slip Ahead of Central Bank Meeting

Asian markets fell on Tuesday as markets braced for a busy week of news featuring policy decisions by global central bankers. The global financial landscape is poised for significant shifts as three major central banks convene to discuss potential interest rate changes. US policymakers, who’ve kept rates at a more than two-decade high for a full year, are widely expected to leave them there again on Wednesday. The Bank of England's meeting is scheduled for Thursday. Completing the trifecta of central bank deliberations, on the regional front, Bank of Japan Governor Kazuo Ueda will have traders on high alert Wednesday when he lays out a detailed plan for quantitative tightening after years of massive easing. He may also double down by adding an interest-rate hike.

U.S. jobs data for July, closely watched surveys on U.S. and global manufacturing, and euro zone gross domestic product and inflation data are all due later this week. On economic news, Japan’s unemployment rate came in slightly lower than expected in July, at 2.5% compared to the 2.6% forecast by a Reuters poll of economists. Hong Kong’s Hang Seng index dropped 1.37% to finish at 17,002.91, while the Shanghai Composite fell 0.43% to 2,879.30. Australia’s S&P/ASX 200 also fell 0.46% to 7,953.20 and South Korea’s Kospi slipped 0.99% to 2,738.19. Japan’s Nikkei gained 0.15% to finish at 38,525.95, while the broad-based Topix fell 0.19% to 2,754.45.

Slumping Tech Stocks Weigh on S&P 500, Nasdaq

The S&P 500 and Nasdaq finished lower overnight, as tech took a beating ahead of earnings from heavyweight tech companies and the Federal Reserve decision this week. The S&P 500 fell 0.50% to close at 5,436.44, while the Nasdaq Composite dropped 1.28% to finish at 17,147.42. The Dow Jones Industrial Average gained 0.50% to end at 40,743.33. A selloff in some of the world’s largest technology companies sent stocks down ahead of key central bank decisions. Nvidia shares pulled back by more than 5.5%, while in late trading Microsoft plunged more than 6% after its cloud revenue underwhelmed Wall Street. Other tech-related giants such as Amazon, Netflix and Apple also declined. The numbers will set the scene for reports from other heavyweights this week, with markets also gearing up for the Federal Reserve decision.

While the Fed is expected to hold benchmark rates at the highest level in more than two decades, traders will be closely watching for any hints that the start of policy easing is near. In the run-up to the announcement, data showed US consumer confidence rose on an improved outlook for the economy and job openings beat forecasts. Small cap and value stocks such as financials outperformed the broader market to extend a recent rotation out of more expensive stocks as the market has solidified expectations the Federal Reserve will cut rates this year following signs of moderating inflation.

Source: TA Research - 31 Jul 2024