Mixed Data

• US equity market increased as manufacturing activity up
• Price increased while spending halted in the US.
• JCI may be corrected as Covid-19 cases rise

S&P500 recorded another record high

US economy showed further expansion with Markit Manufacturing PMI jumping to 62.6 on June’21, better than the consensus expectation of 61.5, and also improving from 62.1 on May’21. However, New Home Sales dropped 5.9% MoM, comparably lower than market expectation with only 0.2% growth (Fig.1). US Equity market improved with S&P500 rose 2.7% last week which lead by footwear, auto, and insurance sectors, while Dow Jones up 3.4%. Despite the minor pullback spurred by concern on the Fed-Policy shift in mid-June, the US equity market continues its uptrend with S&P500 hit another record last week. On the flip side, the US 10Y treasury yield increased 8.6bps last week as inflation fear remained on the bond market.

US spending halted while price rising

U.S. consumer spending paused in May as shortages hurt motor vehicle purchases, but the supply constraints and increased demand for services helped to lift prices, with the Federal Reserve’s main inflation measure rising by the most in 29 years. Consumers perceived higher inflation to be temporary, a survey showed on Friday, aligning with the views of Fed Chair Jerome Powell and Treasury Secretary Janet Yellen. Consumers’ inflation expectations are key as they can influence households’ behaviour. Spending on services rose 0.7% on May’21, led by recreation, restaurants, and hotels as well as housing and utilities. Spending on goods fell 1.3%, with outlays of long-lasting goods like motor vehicles tumbling 2.8%. Goods spending fell as the pandemic confined people to their homes.

JCI potential correction this week as Covid-19 cases rise further

JCI increased 0.3% last week while remained on its sideways trend. Basic Materials (+2.8%), and Industrials (+2.5%) sectors were leading JCI’s positive performance last week while the Transportation and Healthcare sectors were the weakest. Foreign investors recorded a net sell of Rp703.3bn in the regular market last week vs. Rp456bn net buy recorded on the prior week. With surging Covid-19 cases in Indonesia, we expect foreign outflow to continue this week and potentially result in a market correction. Some epidemiologists predict that new Covid-19 cases in Indonesia had not reached their peak, with potential higher numbers to come.

Foreign investors booked a net-sell of Rp7.8tn from the Indonesian government bond market last week. However, Indonesia’s 10Y government bond yield increased were relatively flat, allowing the spread to US 10Y treasury yield to narrow to 5.10% as US treasury yield was increased 8.6 bps last week.