US Rate Cut Optimism to Sustain Foreign Buying

Blue chips extend rise on Tuesday, led by utility, property, energy and consumer heavyweights, mirroring regional strength as optimism on US interest rate cuts by year-end sparked foreign buying. The FBM KLCI added 8.29 points to settle at 1,605.68, off an early low of 1,600.66 and high of 1,610.32, as gainers led losers 684 to 455 on strong turnover of 5.42bn shares worth RM3.79bn.

Resistance at 1,620/1,640; Supports at 1,562/1,550

Spreading optimism over rising potential for US rate cuts by year-end should see increased investor commitments and sustain foreign fund buying. Immediate resistance for the index is revised upwards to 1,620, with stronger upside hurdles seen at 1,640 and then 1,660. Key supports will be at 1,562, 1,550 and 1,526, the respective rising 30-day, 50-day and 100-day moving averages.

Bargain MRCB & UEM Sunrise

MRCB need to overcome the upper Bollinger band (70sen) to boost upside momentum towards the 200%FP (74sen) and 223.6%FP (79sen) ahead, with uptrend support from the 50- day ma (63sen), matching the 150%FP, cushioning downside. UEM Sunrise will need convincing

breach above the 138.2%FP (RM1.22) to extend rally and aim for the 150%FP (RM1.30) and 161.8%FP (RM1.38) going forward, while uptrend support if from the 100-day ma (RM1.00).

U.S. Rate-Cut Hopes Boost Asian Markets

Most Asian markets ended in positive territory Tuesday, following Wall Street’s gains on optimism the Federal Reserve will start cutting interest rates this year. Traders carried over their bullish market sentiment from Friday, when the latest nonfarm payrolls data showed that job growth came in below expectations in April and unemployment ticked higher. The results alleviated concerns that the economy was too hot and raised optimism around rate cuts from the Federal Reserve. Traders also waded through remarks from some of the many Fed officials due to speak this week. Fed Bank of Richmond President Thomas Barkin said he expects high rates to slow the economy further and cool inflation to the 2% target.

Meanwhile, the Reserve Bank of Australia held its benchmark lending rate at 4.35% for the fourth meeting in a row. Australia’s S&P/ASX 200 closed up 1.44% at 7,793.30 after the decision, gaining for a fourth straight day. South Korea’s Kospi also closed 2.16% higher at 2,734.36, while the small-cap Kosdaq ended 0.66% higher at 871.26. Japan’s Nikkei 225 resumed trading after a holiday to end 1.57% higher at 38,835.1, and the broad-based Topix gained 0.65% to close at 2,746.22. The Shanghai Composite Index rose 0.22% to 3,147.74, while Hong Kong’s Hang Seng index fell 0.53% to 18,479.37.

Wall Street Mixed as Traders Seek More Clues on Rate Outlook

Wall Street’s main indexes capped a choppy day with a mixed finish overnight as traders looked for more clues on when the Federal Reserve may start cutting rates. The Dow Jones Industrial Average advanced 0.08% to close at 38,884.26. The S&P 500 added 0.13% and ended the session at 5,187.70, while the Nasdaq Composite slipped 0.10% to close at 16,332.56. Comments from Federal Reserve Chair Jerome Powell combined with weaker-than-expected job growth in April have largely eliminated short-lived concerns the Fed might actually consider raising rates. However, buying interest waned in afternoon trading after Minneapolis Federal Reserve President Neel Kashkari suggested interest rates may need to remain at current levels for an "extended period."

Kashkari also said he could not rule out the Fed once again raising rates, calling the bar for hiking rates "quite high" but "not infinite." Gains were kept also in check as Disney shares fell 9.5% after the media and entertainment giant posted a slight revenue miss but exceeded quarterly earnings expectations. Shares of defense technology firm Palantir plunged 15% on weaker-than-expected guidance. Over 80% of S&P 500 have posted results in the best season for earnings in almost two years, which has seen companies prosper despite "sticky" inflation and higher-for-longer interest rates.

Source: TA Research - 8 May 2024