Morning Briefing: Negative Sentiments Over the Trade War Colored Market

JAKARTA (TheInsiderStories) – Good Morning. Investors still worries on United States – China trade war and stock sell-off reflected on the performance of major global bourse. From domestic side, the surprised trade deficit and the improvement of the 2018’s State budget performance in May will influence market today.

Finance Minister Sri Mulyani Indrawati claims the 2018’s State budget performance until May in the turning point to a positive direction. She said, the inflation level maintained in the range of government target 3.5 plus minus one and the tax revenues improving and rose double digit compared to last year.

After meeting with President Joko Widodo at the State Palace, she also explained that president spoke about the economic strategy to continue moving forward and the current transactions that can be maintained from the side of the deficit. This needs policies to support exports, including tourism and strengthening the development of industries that substitute imports, she added.

During the meeting, president and the economic team also discussed several issues in terms of global, regional, and domestic economic conditions. Moreover, Indrawati stated, there are various combinations of policies that will be adopted, either individually or collectively.

Meanwhile, Statistic Indonesia reported the trade balance in May 201 the country experienced deficit US$1.52 billion, lowered than April 2018 $1.63 billion, but higher than May 2017 which surplus $470 million. Meanwhile, in the current year, the trade balance of January-May 2018 deficit of $2.83 billion.

Indonesia’s balance of payments recorded $3.85 billion in deficit in the first quarter of this year, much worse than $4.51 billion in the first quarter last year.

Surprise in trade deficit put a more pressure rupiah and Jakarta Composite Index (JCI) to the lower level. Rupiah in interbank exchange rate on Monday afternoon dropped 73 points to Rp14,159. The rupiah previously closed at Rp14,086 per U.S dollar.

This morning the JCI open in the negative territory dropped 0.50 percent to 5,829.842 compared a previous day. The Southeast Asian stock markets also fell amid the stock sell-off and trade war issues. Singapore shares fell 0.8 percent, Philippine shares gave up early gains to close at their lowest in one and half years, while, Vietnam shares ended about 0.8 percent higher.

The worse declining showed in American market. The Dow Jones Industrial Average (DJIA) fell 328.09 points, or 1.33 percent, to 24,252.8, the Standard & Poor’s 500 Index lost 37.81 points or 1.37 percent to 2,717.07 and the Nasdaq Composite shed 160.81 points or 2, 09 percent to 7,532.01. DJIA ended the session below its 200-day moving average for the first time since June 2016.

The Unite States’s Treasury Secretary Steven Mnuchin office is drafting restrictions that would ban companies with at least 25 percent to all countries in the world to invest in country’s technology companies. Adding to investor concerns, one of the largest U.S’s manufacturing company Harley-Davidson Inc. announce it will move production of motorcycles delivered to the Europe to its international facilities.

Meanwhile, European stock markets closed lower on Monday, as investor worries mounted on the threat of a global trade war and its impact on the world economy. The Stoxx Europe 600 closed down 2.04 percent or 7.84 points to 377.17, with British FTSE index and German DAX melding 2.3 percen or 2.4 percent respectively.

Commenting on the global and domestic issues, some analysts expect the JCI today to regain movement in the green zone but in the limited range of 5,820-5,920.

The rupiah in interbank exchange rate on Monday afternoon dropped 73 points to Rp14,159. The rupiah previously closed at Rp14,086 per US dollar.

In addition to external factors, crude oil prices fell after Saudi Arabia and Russia signaled that output increases by OPEC and allied countries will be bigger than expected. Brent crude for August delivery shed 1.1 percent, or 82 cents, to settle at $ 74.73 a barrel on the ICE Futures Europe exchange.

Meanwhile, West Texas Intermediate crude for August delivery fell 50 cents to end the session at $ 68.08 on the New York Mercantile Exchange. Total traded volumes reached about 31 percent above the last 100 day trading average.