Extend Rebound on Easing Inflation and US Rate Cut Hopes

Blue chips traded sideways on Tuesday, with late bargain hunting in banking and plantation heavyweights lifting the index, while profit-taking dragged the broader market for softer close. The FBM KLCI added 2.86 points to end at the day’s high of 1,609.52, off an early low of 1,598.30, but losers beat gainers 705 to 334 on slower trade totalling 3.42bn shares worth RM2.5bn.

Resistance at 1,620/1,628; Immediate Supports at 1,580/1,550

The local market should extend rebound along with the region following overnight strength on Wall Street on hopes easing inflation could encourage the US central bank to cut interest rates. Immediate index resistance stays at 1,620, followed by 1,628 and then 1,638, while immediate supports are at 1,580, then 1,550 and recent low of 1,529, with 1,520 and 1,500 as stronger supports.

Bargain Maybank & Public Bank

Maybank need to overcome the upper Bollinger band (RM10.28), matching the 123.6%FP level, to extend uptrend and target the 138.2%FP (RM10.58) and 150%FP (RM10.82) ahead, with uptrend support from the rising 100-day ma (RM9.90) cushioning downside. Public Bank will need resurgent buying momentum to break above the 21/2/24 high (RM4.41) and aim for the

123.6%FP (RM4.60) and 138.2%FP (RM4.72) going forward, with the 61.8%FR (RM4.10) providing strong support in the recent selloff.

Nikkei Led Asian Markets Higher

Japanese markets led gains in Asia on Tuesday as traders await key inflation data from the U.S. and digest latest economic data from the region. Traders focus this week will be on a slew of U.S. economic data that will help sharpen the view on the Federal Reserve's next moves, with markets now evenly split between a 25 basis points cut, or 50 bps cut at the next meeting in September. Over in Asia, traders are assessing fresh data from Japan’s corporate goods price index data and Singapore’s second-quarter GDP growth. Japan’s corporate goods price index rose 3% in July from a year earlier, in line with expectations and climbing at a faster pace compared to 2.9% in June.

Separately, Singapore reported its economy grew 2.9% in the second quarter from a year ago, in line with the advance gross domestic product estimate released in July. Japan’s benchmark Nikkei 225 jumped 3.45% to end at 36,232.51, while the broader Topix gained 2.83% to 2,553.55. Australia’s S&P/ASX 200 rose 0.17% to end at 7,826.80 and South Korea’s Kospi added 0.12% to 2,621.50. The Shanghai Composite also rose 0.31% to 2,867.14, while Hong Kong’s Hang Seng index rose 0.36% to 17,174.06.

Wall Street Rallies on Rate Cut Expectations

Wall Street's main indexes closed in a sea of green overnight after softer producer prices data reinforced bets of an interest-rate cut by the Federal Reserve in September. The Dow Jones Industrial Average rose 1.04% to 39,765.64. The S&P 500 gained 1.68% to 5,434.43, while the Nasdaq Composite jumped 2.43% to close at 17,187.61. The rally on Wall Street came following the release of a Labor Department report showing producer prices crept slightly higher in the month of July. U.S. producer prices increased less than expected in July as a rise in the cost of goods was tempered by cheaper services, indicating that inflation continued to moderate. Year-over-year, the Producer Price Index rose 2.2%, nearly in line with the Federal Reserve's 2% target for inflation.

Traders now await the all-important consumer-price figures for July on late Wednesday and retail sales data on Thursday to firm bets on an aggressive rate cut by the U.S. central bank. Swap traders priced in a nearly 40 basis-point Fed cut in September and a total rate reduction of roughly 105 basis points for 2024. Technology was the best performing sector, followed by consumer cyclicals owing to a record 24.5% jump in Starbucks shares. Nvidia gained more than 6% after analysts at Bank of America named it a top "rebound" stock.

Source: TA Research - 14 Aug 2024