Sideways on Caution Over US Inflation and Rate Cut

Blue chips rebounded on Tuesday, with financial and plantation heavyweights leading gains on foreign fund buying while the broader market extended consolidation. The FBM KLCI ended 8.86 points up at 1,660.35, ranging between early high of 1,661.09 and low of 1,649.53, as losers edged gainers 501 to 479 on slower trade of 3.05bn shares worth RM3.78bn.

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

The local market should trade sideways amid caution over upcoming US inflation data and interest rate cut, as sustained foreign interest on banking stocks cushion downside. 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 AMBank & CIMB

AMBank need to overcome the 161.8%FP (RM5.45) to promote further upside towards the 176.4%FP (RM5.66) and 200%FP (RM5.99) before stalling, with the rising 30-day ma (RM4.85) acting as uptrend support. CIMB will need convincing breakout above the 161.8%FP (RM8.62) to fuel upside momentum towards the 176.4%FP (RM9.00) and 200%FP (RM9.60) going forward, while uptrend support from the rising 30-day ma (RM7.78) cushion downside.

Asian Markets Mixed Ahead of US Data

Asian markets traded mixed Tuesday, as traders awaited US inflation data due this week for clues on the size of the Federal Reserve’s coming interest-rate cut. The fluctuations in the market reflect traders’ caution as they look to balance US recession fears and the likelihood of a soft landing. Traders now turn their attention to Wednesday's U.S. inflation report, which could provide more clarity on whether the Federal Reserve would deliver an outsized 50- basis-point cut when it meets next week. Expectations are for headline inflation in the United States to have further slowed to an annual 2.6% in August, as compared to July's 2.9%. The Federal Reserve is all but certain to ease rates when it meets next week, with markets pricing in a 29% chance of an outsized 50-basis-point move. About 110bps worth of cuts are priced in for the rest of the year.

On economic front, data showed China's exports grew fastest since March 2023 in August, suggesting manufacturers are rushing out orders ahead of tariffs expected from several trade partners, while imports missed forecasts amid weak domestic demand. Japan’s Nikkei 225 reversed gains from the morning session to end 0.16% lower at 36,159.16, and the broadbased Topix closed 0.12% below the flatline. South Korea’s Kospi index also slipped 0.49% to 2,523.43, while Australia’s S&P/ASX 200 edged up by 0.30% to end at 8,011.90. In China, Shanghai Composite index gained 0.28% to 2,744.19, while Hong Kong’s Hang Seng index rose 0.22% to 17,234.09.

Wall Street Mixed as Inflation Data Looms

Wall Street’s major indexes ended mixed overnight as traders geared up for a looming consumer inflation report seen as crucial to determining the size of the first US interest-rate cut in years. The Dow Jones Industrial Average slipped 0.23% to close at 40,736.96. The S&P 500 gained 0.45% to end at 5,495.52, while the Nasdaq Composite rose 0.84%, closing at 17,025.88. The volatility seen over the course of the trading day came as traders looked ahead to the release of closely watched inflation data in the coming days. The reports are expected to show slowdowns by the rates of consumer and producer price growth compared to the same month a year ago.

Market participants were also girding for the first debate between Vice President Kamala Harris and former President Donald Trump, who are locked in a tight race for the White House. Nvidia closed higher by 1.5%, boosting the S&P 500 and the tech-heavy Nasdaq. AMD and Microsoft were also higher. Shares of big banks were under pressure after Federal Reserve Vice Chair for Supervision Michael Barr unveiled sweeping bank capital plan revisions. The sector was further rattled after JPMorgan Chase issued an interest income warning as interest rates are expected to ease.

Source: TA Research - 11 Sept 2024