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.
U.S. stocks extended their gains on Wednesday after an in-line consumer price index (CPI) report reinforced expectations that the Federal Reserve will begin cutting interest rates in September. The S&P 500 marked its fifth consecutive day of gains, while the Nasdaq 100 also edged higher.
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Key Highlights:
CPI Report: The CPI report showed that inflation is continuing its downward trend, aligning with market expectations and providing some relief after recent market volatility. The data, combined with a softening labor market, strengthens the likelihood of a Fed rate cut next month, though the extent of the cut remains a topic of speculation.
Market Reaction: The S&P 500 hovered near 5,455, with financial, energy, and tech shares leading the way. Cisco Systems Inc saw a late trading boost following a positive revenue forecast. Meanwhile, Wall Street's "fear gauge," the VIX, continued to decline, signaling reduced market anxiety.
Fed Outlook: With the CPI data in line with expectations, analysts and traders are now debating whether the Fed will opt for a 25-basis-point or a 50-basis-point cut in September. The Fed is now placing greater emphasis on labor market data over inflation data to guide its decisions.
Treasuries and Dollar: Treasury yields saw little change, with the 10-year yield holding at 3.84%. The dollar remained at a four-month low, reflecting market sentiment that favors a Fed rate cut.
Analyst Insights:
- Chris Larkin of E*Trade noted that while the CPI report wasn't as cool as the previous day's Producer Price Index (PPI), it was sufficient to maintain market stability.
- Mark Hackett from Nationwide highlighted that "calming macro fears" have improved the backdrop for equities.
- Strategists from TD Securities remarked that the CPI data "checks the box" for the Fed to begin cutting rates, with the main question being the size of the cut.
Future Indicators: The upcoming August labor report and retail sales data will be critical in determining the Fed's approach. While the current CPI data supports a rate cut, the decision on whether to cut by 25 or 50 basis points may hinge on these upcoming economic indicators.
Outlook: The U.S. economy is showing signs of cooling, with a slight slowdown in the labor market. Despite these developments, concerns over a short-term recession remain muted. Analysts are prepared to capitalize on any market volatility, confident that the underlying trends of cooling inflation and a slowing economy will persist.
The overall sentiment is that while the Fed is likely to start cutting rates in September, the extent of these cuts will be guided by forthcoming economic data, particularly related to the labor market and consumer spending.
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