Our Comments and Expectations
External Background. The S&P 500 showed the largest decline since October 31. The trigger for the decline was comments from Federal Reserve Chairman Jerome Powell. He stated that economic indicators were "surprisingly good" and noted that a slowdown in the pace of monetary easing could be justified as interest rates approach neutral levels. However, Powell refrained from commenting on a potential rate cut at the December meeting. Traders reduced the probability of a 25-basis-point rate cut in December to 55% from 80% the previous day. Powell also mentioned that inflation, in his forecast, will remain on a "somewhat bumpy" trajectory, approaching the target level of 2%. Meanwhile, Morgan Stanley believes that the S&P 500 could reach 6100 points (+0.85%) by the end of the year amid enthusiasm surrounding a Republican victory in the White House and Congress. Data showed that last week, the number of jobless claims reached the lowest level since May, while producer prices rose in October. In Europe, indices recovered from the August-September lows. In Asia this morning, there is a neutral trend. The Chinese economy shows signs of stabilization: industrial production rose by 5.3% year-on-year, though the growth rate was slightly lower than in the previous month. Oil is trading around $71.8 per barrel. The International Energy Agency (IEA) forecasts that global oil markets will face an oversupply of more than 1 million barrels per day next year due to unstable demand from China.
Bonds. The yield on U.S. 10-year bonds slightly decreased, but this did not help corporate bonds.
KASE Index. KASE declined, showing a correlation with the U.S. market. The index retreated from historical highs, interrupting a seven-session consecutive growth streak. The recent candlestick, which hinted at bearish sentiment in the market, was reflected on the chart. We believe that the current situation with the index is not critical and is more likely to result in a local pause in the growth of the Kazakhstani market rather than a reversal.
Index Stocks. The biggest drop yesterday was in the shares of Halyk Bank, which had the most similar movement to the KASE index. However, these stocks have formed a strong growth channel that began in May 2022. At the moment, the quotes are not at the upper boundary of this channel, but rather at ¾ of the channel’s height, which still leaves room for growth until the end of the year. It has been announced that Kazakhstan will require banks to join the digital payment system, which is scheduled to launch in December. This news is more positive for Halyk Bank and moderately negative for Kaspi. The ADS of fintech companies fell by 2%, which is a locally negative signal for the stocks from a technical perspective.
Currency. On its 31st anniversary, the tenge weakened to 496 tenge per dollar, which indicates the short-term effect of the National Bank’s verbal interventions. The U.S. dollar index (DXY) is showing a slight decline today.