STAR Insight, Market Update 6 Juli 2021

No sign of panic in Indo market

  • Equity and Bond rose after high unemployment data
  • OPEC+ resumes oil talks, output could rise
  • JCI flat despite rising Covid-19 cases


S&P500 recorded another record high

S&P500 rose 1.7% and DJIA up 1.0% as unemployment data came in higher than expected which lowering the risk of early tapering by The Fed. The unemployment rate in Jun’21 was recorded at 5.9%, higher than the previous month of 5.8% and market expectation of 5.6%. S&P500 gain last week was led by information technology, consumer discretionary, and healthcare sectors, which helped the index to make a new highest record last week. US Dollar index, a gauge of the US Dollar against its major counterparts, dropped following the labor data announcement but remained positive for the week with a 0.4% gain. US 10Y Treasury yield dropped 10.0bps last week despite some positive economic data in the country spurred concern on faster than expected economic recovery in the country might push inflation higher than The Fed’s comfort level.

OPEC+ resumes oil policy talks

OPEC+ ministers resume talks after failing to reach a deal on oil output policy in two days of talks last week amid a rare public standoff between Gulf allies Saudi Arabia and the United Arab Emirates. The spat erupted at a sensitive time and could delay plans to pump more oil through to the end of the year to cool global oil prices that have soared to two and half year highs. Brent currently trades at around $77 per barrel with a YTD’21 average price of $65.6 per barrel, higher than the prior-to-Covid-19 FY2019 average price of $64.2 per barrel. OPEC+, which agreed to record output cuts in 2020 to cope with a COVID-induced price crash, voted on Friday to lift output by about 2 million barrels per day (bpd) from August to December 2021 and to extend their remaining cuts to the end of 2022, instead of ending in April 2022. With possible higher oil output to come, we see a potential correction for the oil price in 2022 while the outlook throughout year-end of 2021 will be determined by economic growth in large consuming countries which currently under the threat of rising Covid-19 cases from the new variants.


JCI flat, bond yield slightly up as Covid-19 cases hit a new record

Despite rising Covid-19 new cases which reached 29.7k yesterday and emergency PPKM imposed by the government in Java and Bali, JCI managed to move relatively flat last week. We see that despite foreign investors booked net-sell of Rp732bn, domestic investors remained optimistic on Indonesia’s growth outlook despite this third wave of high Covid-19 cases.

On the bond market, Indonesia’s 10Y government bond yield slightly increased by 4.5 bps last week while we see no foreign outflow from the government bond market on the week