Our Comments and Expectations
External Background. The S&P 500 closed at session lows yesterday, showing a neutral result compared to the previous session. The market focus was on economic data that failed to meet expectations, which led to a rise in Treasury bond prices and strengthened assumptions that the Federal Reserve will cut interest rates at least twice this year to prevent a recession.
According to ADP, U.S. private employers added only 37,000 jobs in May — significantly below the forecast of 114,000 — which may indicate a slowdown in employment growth in Friday’s upcoming non-farm payrolls report. The ISM Services PMI fell slightly below 50 points, entering contraction territory for the first time in a year. In response, Donald Trump stated that Jerome Powell should cut rates, calling the Fed Chair "incredible." Swap traders are now pricing in two rate cuts — in October and December — with the likelihood of a move as early as September exceeding 90%.
On the political front: Trump noted that reaching a deal with China is difficult. Meanwhile, the EU stated that trade talks with the U.S. are “moving in the right direction,” despite imposed tariffs on steel and aluminum.
In Europe, indices rose: the Stoxx 600 added 0.5%, and the DAX gained 0.8%, hitting new all-time highs. Today, the ECB is expected to cut rates by 25 bps — down to 2%. Futures indicate a slight decline in European and U.S. indices. In Asia, the Hang Seng index continued to rise for a third day, albeit at a slower pace. South Korea led the gains, with its index rising 1.3% following the victory of a new president.
Bonds. The yield on 10-year U.S. Treasuries fell to the level of the 50-day moving average amid weak economic data. At the same time, emerging market bonds reached their highest levels since March.
KASE Index. The KASE index had a moderately positive session yesterday, rising by 0.6%. Quotes have been climbing for the third session in a row from a local support level around 5,550 points.
Index Stocks. The top gainer yesterday was Kazakhtelecom. We previously noted that the stock was showing early signs of a reversal, and yesterday’s growth reinforced those signs. However, we do not share the market’s optimism: another 3–4% increase would bring the quotes to the range of the autumn 2024 sideways trend, a time when dividends were not yet confirmed, and the sale of Mobile Telecom-Service was not apparent.
KazMunayGas shares also rose, but from a technical perspective, nothing has changed — the quotes remain in a sideways trend.
On the LSE, Halyk Bank gained 1.8%, but it is still testing the 50-day moving average. Kazatomprom GDRs added another 0.9%, strengthening their position above the resistance level.
Currency. The dollar strengthened against the tenge yesterday, but USDKZT quotes failed to break the resistance level and remained in a sideways trend. As of this morning, the dollar is trading at 510 tenge on the Forex market.