KUALA LUMPUR, July 29 (Bernama) -- Bursa Malaysia rebounded to close higher on Wednesday on selective buying of defensive stocks after a volatile trading session. IPPFA Sdn Bhd director of investment strategy and country economist Mohd Sedek Jantan said consumer products and services stocks lifted the key index higher, overcoming lingering geopolitical concerns. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 3.08 points to 1,715.56 from yesterday’s close of 1,712.48. The benchmark index, which opened 1.91 points higher at 1,714.39, moved between 1,710.79 and 1,720.59 during the day’s trading. In the broader market, gainers outstripped decliners 550 to 476, while 612 counters were unchanged, 1,129 untraded, and 48 suspended. Turnover rose to 2.96 billion units valued at RM2.48 billion from 2.94 billion units valued at RM2.56 billion on Tuesday.
The US job market showed signs of slowing in June, with expectations of moderate job growth and wage increases. This trend could boost the Federal Reserve's confidence in managing inflation without tipping the economy into a recession.
Job Growth: US job growth likely slowed to a still-healthy pace in June. Nonfarm payrolls are expected to have increased by 190,000 jobs, down from 272,000 in May. Despite the slowdown, the economy continues to create enough jobs to keep up with the growth in the working-age population, especially with the recent surge in immigration.
Unemployment Rate: The unemployment rate is expected to remain steady at 4%. However, some economists predict it could drop slightly to 3.9%. The rate had risen to 4.0% in May for the first time since January 2022, influenced by volatile youth unemployment.
Wage Growth: Annual wage growth is anticipated to rise at its slowest rate in three years. Average hourly earnings are forecast to increase by 0.3% in June, down from 0.4% in May. This would bring the annual increase in wages to 3.9%, the smallest gain since June 2021. Wage growth in the range of 3%-3.5% aligns with the Fed's 2% inflation target.
Inflation and Federal Reserve Policy: The moderation in job and wage growth supports the ongoing disinflationary trend, which had been disrupted earlier in the year. With prices moderating in May and wage growth slowing, the Federal Reserve may feel more confident about the inflation outlook. This could lead to the Fed considering interest rate cuts later in the year. Financial markets are optimistic that the Fed could start easing its monetary policy as early as September.
Economic Stability: Despite high inflation and interest rates, the economy appears to be on a "disinflationary path" and is moving towards sustainable employment growth. There are no signs of a sudden economic decline, indicating the possibility of a "soft landing" where inflation is controlled without triggering a recession.
Sector Performance: Job growth has been driven by sectors like healthcare, leisure and hospitality, and state and local government education, which are returning to pre-pandemic staffing levels. This trend is expected to continue at a moderate pace.
Market Expectations: The financial markets remain positive, anticipating that the Fed will start its easing cycle soon. The expectation of interest rate cuts is based on the belief that the Fed's aggressive tightening in 2022 and 2023 will not need to continue at the same pace.
Conclusion:
The US labor market's moderation in job and wage growth is a positive sign for managing inflation. The Federal Reserve is likely to consider this trend when making future monetary policy decisions, potentially leading to interest rate cuts later in the year. Overall, the economy is on a path to stable growth, with positive market sentiment regarding the Fed's ability to control inflation without causing a recession.
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