JCI Returns to the Green Zone Amid Strengthening US Economic Data

Workers are in front of a screen showing the movement of the Jakarta Composite Index (IHSG) on the Indonesia Stock Exchange, Jakarta, Wednesday (26/4/2023).

Armfalcon.com, JAKARTA — The Composite Stock Price Index (IHSG) reversed towards the green zone on Friday trading (26/5/2023). JCI strengthened to a level of 6,725.84 after experiencing a correction of 0.62 percent at the close of trading yesterday.

The strengthening of the JCI is in line with the movement of global stock exchanges. “The majority of stock indices in Asia this morning opened higher after the main stock indexes on Wall Street closed mixed overnight with the NASDAQ up 1.71 percent,” said Phillip Sekuritas Indonesia.

Meanwhile, on the bond market, the yield on US government debt with a tenor of 10 years rose 3.8 bps to 3.74 percent amid uncertainty over the increase in the US government’s debt ceiling. The White House and Republicans in Congress restarted negotiations yesterday in an effort to reach a deal before June 1.

On the other hand, the release of US economic data last night further strengthened the view that a number of recent US economic data did not match the narrative built by economic experts that the US economy would soon enter a recession.

The second calculation of the US Gross Domestic Product (GDP) data in the first quarter of 2023 grew 1.3 percent qoq, slightly higher than the initial estimate of 1.1 percent qoq and the market forecast of 1.1 percent qoq. Consumer spending grew 3.8 percent qoq, higher than the initial estimate of 3.7 percent qoq amid high inflation rates.

Initial Jobless Claims data shows the number of first-time recipients of unemployment benefits in the US reached 229,000 people for the week ending May 20. This figure was up from 225 thousand in the previous week which was also the lowest level in two months but far below the market forecast of 245 thousand.

“This Initial Jobless Claims data gives an indication that the US labor market is still quite strong,” said Phillip Sekuritas Indonesia.

The combination of solid economic growth in the first quarter of 2023 and the still high inflation rate will increase the chances for the US central bank to continue raising its benchmark interest rate. This step is necessary to slow down economic activity so that the inflation rate can fall back to the target of 2.0 percent.

“Market players see a 50 percent chance that the benchmark interest rate will be raised or maintained by the Federal Reserve in June,” said Phillip Sekuritas Indonesia.

source: ekonomi.republika.co.id

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