Corrections in U.S and Europe to Drag Stocks Lower

Blue chips extended range bound trading on Tuesday, as investors awaited key economic and inflation data from the region for further market leads. The FBM KLCI eased 1.54 points to close at 1,676.65, off an early high of 1,684.06 and low of 1,673.86, as losers edged gainers 518 to 502 on lower turnover of 2.98bn shares worth RM2.94bn.

Supports at 1,633/1,620; Key Resistance at 1,684/1,695

The overnight correction on U.S And European markets, dampened by the lingering concerns over the economic slowdown, should filter through to drag the local market lower. Immediate index support remains at the recent correction low of 1,633, with 1,620 and 1,600 acting as stronger supports. Key resistance will be the recent high of 1,684, then 1,695, the Dec 2020 high, followed by the 123.6%FP (1,702) and 138.2%FP (1,741) of the 1,369 low to the 1,638 high.

Bargain Gadang & SunCon

Gadang needs to overcome the 200-day ma (39sen) convincingly to enhance upside momentum towards the 61.8%FR (43sen) and 76.4%FR (46sen) ahead, while the 23.6%FR (33sen) provides good chart support. SunCon will need to decisively overcome resistance from the 123.6%FP (RM4.58) to promote further upside towards the 138.2%FP (RM4.92) and 150%FP (RM5.19) going forward, with downside risk capped by key support from the 100-day ma (RM3.79).

Asian Markets Wobble Ahead of US. Data

Asian markets were subdued on Tuesday as traders waited on a raft of economic data to determine how deeply the U.S. can cut interest rates. Upbeat spending figures on Friday led markets to trim the chance of a half-point easing from the Federal Reserve. The U.S. ISM manufacturing survey due later in the day and particularly jobs data due on Friday will be crucial for the Fed's decision. Markets are pricing a start to the US easing cycle this month, with a roughly one-in-four chance of a 50 basis-point cut, according to data compiled by Bloomberg. On economic front, Korea’s consumer price index recorded a 2% rise year on year, coming down from July’s 2.6% and in line with expectations from a Reuters poll of economists. On a month-on-month basis, the CPI rose 0.4%, slightly higher than the 0.3% expected from the Reuters poll.

In Hong Kong, shares in property company New World Development slumped to a twodecade low after the company estimated a HKD2.6 billion loss for the year to June. South Korea’s Kospi was 0.61% lower at 2,664.63, and the small cap Kosdaq dipped 1.15% to 760.37. Japan’s Nikkei 225 was marginally down, closing at 38,686.3, but the Topix was 0.64% higher, finishing at 2,733.27. Australia’s S&P/ASX 200 was also down 0.08%, ending the day at 8,103.20. In China, Shanghai Composite index lost 0.29% to 2,802.98, while Hong Kong’s Hang Seng index fell 0.23% to 17,651.49.

Wall Street Slides on Weak Economic Data

Wall Street’s major indexes slumped overnight, as traders assessed weak manufacturing data that reignited concerns over an economic slowdown. The Dow Jones Industrial Average fell 1.51% to end at 40,936.93. The S&P 500 slid 2.12%, closing at 5,528.93. The Nasdaq Composite dropped 3.26% and settled at 17,136.30. All three indexes notched their worst days since the global sell-off on Aug. 5. The sell-off on Wall Street came after the Institute for Supply Management released a report showing a continued contraction by U.S. manufacturing activity in the month of August. A separate report released by the Commerce Department unexpectedly showed a modest decrease by U.S. construction spending in the month of July. The data led to renewed concerns about the economic outlook, which contributed to the sell-off seen in early August.

That comes ahead of Friday’s monthly jobs report, a key reading that could influence the pace of the Federal Reserve’s expected interest-rate cuts. Chip stocks weighed on the market, with high-flying Nvidia dropping more than 9%. Micron, KLA and Advanced Micro Devices also saw declines in the session. Other chip stocks fell in tandem, with Broadcom, Qualcomm, and Taiwan Semiconductor Manufacturing Company all down more than 6%. The S&P 500′s information technology sector led the broad index lower and saw its worst day since September 2022.

Source: TA Research - 4 Sept 2024