Our Comments and Expectations
External Background. The S&P 500 failed to update its highs for the third consecutive day, declining by a modest 0.11%. The latest labor market data came in strong, reducing expectations of monetary policy easing and causing government bond yields to rise. In May, job openings unexpectedly increased to 7.77 million — the highest level since November — while layoffs declined. In recent weeks, Fed officials have consistently described the labor market as strong. Meanwhile, activity in the manufacturing sector fell for the fourth straight month, as both orders and employment contracted at a faster pace. This week, the Non-Farm Payrolls report will be released on Thursday, as the U.S. markets are closed on Friday for Independence Day. The report is expected to show a slowdown in nonfarm employment growth and an increase in the unemployment rate. Today’s ADP report is likely to reflect an increase of 98,000 jobs in June, up from 37,000 in May. Meanwhile, Trump’s tax bill has passed the Senate and been sent to the House of Representatives. The lower chamber is expected to vote on the measure Wednesday, though the outcome remains uncertain. In the corporate sector, positive news came from banks: Goldman, Citi, and BofA reportedly plan to raise dividends after passing the Fed’s stress tests. JPMorgan and Morgan Stanley received approval for stock buybacks of $50 billion and $20 billion, respectively. In Europe, Germany’s DAX index dropped by 1%. Inflation in the Eurozone stabilized at the ECB’s target level of 2% year-over-year. Morning trading in Asia is showing moderate activity. Trump stated that a trade deal with Japan is unlikely, although this did not trigger significant sell-offs in the Nikkei 225 index. Oil remains stable, consolidating after the volatility seen in mid-June.
Bonds. Yields on 10-year U.S. Treasuries are rising after hitting their lowest levels since May 1.
KASE Index. Despite our cautious expectations, the KASE index rose above the 6,030 mark yesterday and updated its all-time high. We continue to monitor for signs of a bear flag or a false breakout.
Index Stocks. Two stocks pushed the index upward yesterday — Bank CenterCredit (CCBN) and Halyk Bank (HSBK). We had highlighted both earlier as showing strong technical setups. HSBK broke through resistance levels and exited a triangle formation, while CCBN has been rising steadily since May 23. The largest declines were seen in Kazakhtelecom and Air Astana shares, both of which are consolidating after a recent spike in volatility. We believe AIRA may find a local balance between 720 and 740 KZT. However, its GDRs continue to decline on the LSE, hitting new lows. Kazatomprom lost 0.6% on the LSE yesterday — a weaker performance compared to other sector names.
Currency. This morning, the USDKZT pair is trading at 518.3 KZT, suggesting the formation of a local triangle. The dollar has local support at 517.8 KZT. On the DXY chart, the dollar is rebounding after seven consecutive sessions of decline.