Our comments and expectations
External Background. Yesterday's session proved challenging for global markets. As we mentioned, Bloomberg called September the worst month of the year for the S&P 500, and the following day, we saw the deepest one-day market decline since August 5, with the market losing 3%. The fear index (VIX) spiked to 20.71 points (+33%). The negative news centered around the ISM manufacturing index, which showed that U.S. industrial activity contracted for the fifth consecutive month. The August index came in at 47.2 points, compared to 46.8 in July, with expectations at 47.5 points. Recall that readings below 50 indicate contraction in the economic aspect that the ISM index reflects. The biggest declines were seen in the technology, industrial, and energy sectors. The technology sector ETF fell by 4.6%, even more than the early August drop. A similar situation occurred with the Nasdaq index, which lost 3.15%. Most likely, the market will remain tense until Friday's jobs report, which could also trigger market volatility. The August report is expected to show an increase of about 165,000 jobs in the world's largest economy. The unemployment rate is likely to have dropped slightly from 4.3% to 4.2%. In Europe, the Stoxx 600 and DAX fell by about 1%, which is less than the S&P 500, but the decline has dampened the rally that European markets were experiencing. In Asia, a deeper decline was observed this morning—Nikkei 225 fell by 4.4%, Kospi by 3%, and Hang Seng by 1.3%. Pimco Japan expects the Bank of Japan to raise rates again in January. Oil fell to $73.4 per barrel of Brent. It was reported that the former head of Libya's central bank, Sadiq al-Kabir (who fled the country), sees "serious" signs that political factions are nearing an agreement to overcome the current stalemate and restore oil production. This likely triggered the drop in oil prices.
Bonds. The yield on U.S. 10-year treasuries retreated to 3.83% as investors sought safe-haven assets. Non-investment-grade corporate bonds fell in price.
KASE Index. KASE also succumbed to pressure from external markets (indices, commodities) and declined for the fifth consecutive session, dropping to levels last seen before August 14.
Index Stocks. Stocks in the index are under pressure and are likely to end in the red again today. However, a more significant negative impact may come from GDRs, which posted larger declines than the main stocks on KASE. Kaspi lost 4.15% yesterday, erasing the breakout above the 50-day moving average. Technically, this is not critical as long as the stock stays within the sideways channel (i.e., above $123), but the attempt at local growth seems to be on hold. Halyk Bank fell to $16.8, nearing its February 2023 lows.
Currency. The dollar rose to 483.6 tenge this morning, reaching the highs of August 23, when the USDKZT pair broke through the 480 tenge level. We are watching for a possible breakout of previous highs and a move toward 486.