KUALA LUMPUR, Sept 8 (Bernama) -- Bursa Malaysia closed almost flat on Tuesday as buying interest rotated away from index heavyweights towards smaller-cap construction stocks, with sentiment affected by geopolitical uncertainty, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased 0.39 of a point to 1,714.40 from Monday’s close of 1,714.79. The benchmark index opened 1.65 points lower at 1,713.14 and moved between 1,710.44 and 1,714.50 throughout the trading session. The broader market was almost evenly balanced, with decliners leading gainers 548 to 546, while 598 counters were unchanged, 1,107 were untraded and 25 were suspended. Turnover expanded to 4.13 billion units valued at RM3.14 billion from 3.60 billion units valued at RM2.45 billion on Monday.
Global stocks made a strong recovery on Tuesday, reversing some of the heavy losses from the previous day. Central bank reassurances helped to calm investor nerves, but caution still prevails in the market.
Key Points:
Stock Market Recovery:
- The Nikkei index surged over 10%, climbing above 34,500 after closing at 31,458 on Monday. This followed a 12.4% drop, marking its worst daily sell-off since the 1987 Black Monday crash.
- Wall Street showed signs of stability, with S&P 500 futures rising 1% and Nasdaq futures up 1.4%. Europe’s STOXX 600 index also gained 0.7% after a 2.2% decline on Monday.
- The S&P 500 and Nasdaq faced significant losses on Monday, dropping 3% and 3.43%, respectively, amid fears of a potential US recession.
Treasury Yields and Investor Sentiment:
- Yields on 10-year Treasury notes recovered to 3.84% after dipping as low as 3.667%.
- IG Chief Market Strategist Chris Beauchamp noted that the dramatic market movements could have caused investors to overreact. He highlighted the typical market weakness during this time of year.
Central Bank Reassurances:
- Federal Reserve officials, including San Francisco Fed President Mary Daly, sought to reassure markets. Daly emphasized the importance of preventing a labor market downturn and expressed openness to adjusting interest rates proactively.
- The US ISM services index rebounded to 51.4 for July, alleviating some fears of an imminent Fed rate cut.
Currency and Bond Market Movements:
- The US dollar gained 0.7% against the yen, reaching ¥145.31 after a sharp drop to ¥141.675 on Monday. The yen had strengthened due to the unwinding of carry trades.
- The dollar also pared losses against the Swiss franc, rising 0.4% to 0.8555 francs.
- The rebound in the ISM services index’s employment component suggested that the labor market might be stronger than previously thought.
Market Caution and Outlook:
- Investors remain cautious about re-entering equity markets, with ongoing uncertainty about the trajectory of economic data and Federal Reserve actions.
- The yen has seen a 12% decline since its peak five weeks ago and is considered oversold, making it vulnerable to positive US economic data.
Federal Reserve and Rate Expectations:
- Market expectations for a 50 basis point rate cut by the Fed in September remain strong, with a 71% chance of such a move implied by futures.
- Markets have priced in around 100 basis points of easing for both 2024 and 2025.
Commodity Markets:
- Gold prices stabilized at US$2,408 an ounce after a 1.52% drop overnight, as investors took profits to cover losses in other areas.
- Oil prices rebounded, with Brent crude futures rising 0.9% to US$77 a barrel. The increase followed news of an attack on a US military base in Iraq, heightening concerns about a broader conflict in the Middle East.
Conclusion:
While global stocks have made a partial recovery, investors remain cautious amid ongoing economic uncertainties and geopolitical tensions. Central bank reassurances have helped stabilize markets, but the path forward remains uncertain as markets react to economic data and central bank policy signals.
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