From previous post, we have discussed about the concern on US investors on interest rate rising again or not. If US investors have big move on their concern, Dow Jones has substantial up or down, then it may again influence our Bursa Malaysia market sentiment in near term. No doubt, the huge economy driving projects, 9MP inclusive SJER (Southern Johor Economic Region) project will drive our economy to another era. In other words, mid and long term perspective on our market is still encouraging.
Saturday, August 05, 2006
WORLD MARKET ARE IN CAUTIOUS AGAIN - 5 AUG 2006
US market report on 4 Aug 2006, http://yahoo.reuters.com/news/articlehybrid.aspx?type=comktNews&storyID=urn:newsml:reuters.com:20060804:MTFH41239_2006-08-04_22-30-57_N04261350&pageNumber=1&imageid=&cap=&sz=13&WTModLoc=HybArt-C1-ArticlePage1
"Rising interest rates are a negative for stocks because they mean higher borrowing costs for corporations and consumers. Worries that U.S. economic growth has slowed too fast also have kept investors on edge.
Stocks rallied early on the jobs report, then reversed course to end down slightly as concerns about slowing growth offset optimism about the possible pause in rate hikes."
From the article above, we can see that US market is now in cautious on whether FED raise or not raise interest rate on Tuesday meeting. If FED raises interest rate, it has direct negative relationship to US stock market, if FED decides not to raise interest rate, US market may concern on slowing economy which may contribute to weaken company earnings. Therefore, we can see the negative sides on both decision.
US UNEMPLOYMENT RATE JUMPED, SLOWING ECONOMY MAY LEAD TO INTEREST RATE HIKE PAUSE
By Glenn Somerville
WASHINGTON, Aug 4 (Reuters) - U.S. employers added a fewer-than-expected 113,000 jobs in July and the unemployment rate jumped unexpectedly to 4.8 percent, confirming a slowing economy and igniting hopes for an interest-rate pause by the Federal Reserve.
Analysts said the key Labor Department jobs report on Friday has made it easier for Fed policy-makers to halt a two-year campaign of interest-rate rises when they meet on Tuesday.
Average hourly earnings continued to rise last month, despite signs of developing slack in the labor market.
The unemployment rate rose to its highest since a matching 4.8 percent in February, contrary to Wall Street economists' forecasts that it would be unchanged from June's 4.6 percent.
"There is no doubt this number has given the market the feeling the Fed is not going to raise rates on Tuesday," said Kevin Flanagan, a bond strategist with Morgan Stanley in Purchase, New York.
Bill Gross, the chief investment officer at Pacific Investment Management Co. (PIMCO) in Newport Beach, Calif., predicted flatly: "The Fed will definitely pause on Tuesday."
A Reuters poll, conducted after the employment data was issued and influenced by it, found 17 of 22 of the biggest Wall Street firms foresaw the Fed keeping rates on hold on Tuesday.
Stock prices rose strongly in early trading (4 Aug 2006) but, by the end of the day, optimism about a cap on rate hikes gave way to gloom that slower growth might mean weaker corporate profits.
Analysts had forecast a more robust 142,000 new jobs would be generated in July. The department revised June's new-job total up to 124,000 from a previously reported 121,000 and said that in May 100,000 jobs were created rather than 92,000.
Some analysts said the wage rises might give Fed policy-makers cause to worry that the inflationary impact of costlier labor has not made its way through to prices yet. If so, the U.S. central bank might want to raise rates again.
WHAT A WEEK : FED RALLY FADES - 4 AUG 2006
Investors spent the week consumed with anticipation about whether or not the Federal Reserve will increase the fed funds rate. Their sigh of relief Friday, when the Labor Department reported a weaker-than-expected payrolls report, quickly turned into a sigh of despair.
In a classic "buy the rumor, sell the news" phenomenon, the pre-jobs, pre-Fed rally faded as investors realized that a Fed pause does not guarantee a soft landing in the economy, nor does it necessarily mean an end to more rate hikes. The one thing a Fed pause does mean is that the economy is slowing, and that puts pressure on earnings growth.
"The 'Fed is done' fire behind buying stocks has run its course," says Peter Boockvar, chief market strategist at Miller Tabak. "Now it's about, 'look what we're left with.'"
On Friday, investors were left with a sinking feeling after early euphoria quickly evaporated. After rising more than 100 points earlier in the day, the Dow Jones Industrial Average fell 0.02% to 11,240.35. The S&P 500 dropped 0.1% to 1279.43, and the Nasdaq Composite slipped 0.35% to 2085.05. For the week, the Dow finished up 0.2%, the S&P rose 1 point to 1279.43, while the Nasdaq fell 0.4%.
By Liz Rappaport
Markets Columnist
8/4/2006 5:25 PM EDT
Markets Columnist
8/4/2006 5:25 PM EDT
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