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29 July 2019

Weekly Market Review (29 July 2019) - What happened & What's next?

Market update

  • While US equities posted new highs (SPX +1.7% WoW) on strong corporate earnings, Asian equities struggled, posting declines of -0.8WoW, as investors somewhat pared back their expectations on the extent of easing by CBs. In the UK, new PM Boris Johnson reiterated his promise to leave the EU by 31-Oct with or without a deal, raising the risk of a hard Brexit. On domestic side, given a foreign outflow of USD171.7m, JCI plummeted by -2%WoW to IDR6,325.2 by the end of the week. Infrastructure was the worst performer with -4.8%WoW as market anticipated weak result on telco company. Meanwhile, Property sector was relatively better among other sectors in JCI (-0.3%WoW) last week.  News flows to be watched within this week include China’s PMI; US FOMC Rate Decision, ISM Manufacturing, Trade Balance, Avg Hourly Earnings and initial jobless claim; Indonesia’s PMI and CPI.
  • IDR weakened to IDR14,009 (-0.5%WoW), slightly better than average emerging markets (-0.7%WoW). On the other hand, DXY rose to 98.0 (+0.9%WoW).
  • Concern on global growth and trade wars fear made bond market yield increased by 5-12 bps. 5 years benchmark series increased the most.
  • Foreign investor reported net inflow of IDR0.97Trnover the week, mostly on 10 years series
  • US GDP growth slowed to 2.1% from 3.1% in the prior quarter ahead of Fed meeting. Despite the slowing US growth, 10 year US Treasury yield increased from 2.05% to 2.08% over the week.

Global news

  • US Initial Jobless Claims decreased by 10,000 to a seasonally adjusted 206,000 in the week ended July 20. Market had expected claims at 219,000.
  • US GDP rose +2.1%QoQ in 2Q19, down from +3.1% in 1Q19, beating expectations (+1.8%QoQ), as PCE and government spending supported growth, but annual downward GDP revisions support an insurance rate cut next week.
  • The ECB tweaked its guidance and maintained policy rates unchanged last week. Despite more hawkish tone than expected, the ECB changed its interest rate forward guidance, referring to the possibility of future rate cuts, and issued a dovish statement that stresses its determination to deliver more easing “if the medium-term inflation outlook continues to fall short of its aim”.

Domestic News   

  • Indonesia July CPI seen at 3.2% in weekly Central Bank survey. A survey in the third week of July saw prices accelerate by 0.2