Morning Chatter

 

Market Commentary :
US equities sold off sharply on Wednesday as weakness across semiconductor stocks and escalating geopolitical tensions in the Middle East. The Dow Jones, S&P500 and Nasdaq declined -1.9%, -1.6% and -2.0%, respectively, with technology leading the downturn. Nvidia and Broadcom were among the biggest laggards, dragging the Philadelphia Semiconductor Index down -3.6%, while the broader technology sector entered correction territory, having retreated -11% from its June peak amid growing concerns over elevated AI-related valuations. Risk sentiment deteriorated further following President Trump’s warning of potential additional US military action against Iran, raising the prospect of a prolonged regional conflict and renewed upside risks to energy prices. Against this backdrop, oil extended its rally, with WTI and Brent crude rising +2.1% and +1.8% to USD90.03/bbl and USD93.10/bbl, respectively.

On the macro front, US May CPI accelerated to 4.2% YoY, its highest reading since April 2023, reinforcing the higher-for-longer rates narrative. While the Federal Reserve is still expected to leave policy rates unchanged at its upcoming meeting, stronger inflationary pressures have increased market expectations for a further rate hike later this year.
Elsewhere, European equities were largely unchanged, with the Stoxx600 edging down -0.1% as investors balanced geopolitical developments against the upcoming ECB policy decision.

Asian markets closed mostly lower on Wednesday. However, the JCI outperformed, rising +2.71% to 5,902.38, supported by gains in BBCA, TLKM, BBRI and BMRI despite net foreign outflows of IDR3.13 tn. Despite a weaker global backdrop driven by heightened geopolitical tensions and higher oil prices, we expect the JCI to extend its gains today, supported by improving sentiment toward the USD/IDR outlook.

Regards,
KBVS Research Team

 

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