Our Comments and Expectations
External Background. The S&P 500 opened higher but ended the session in negative territory due to a decline in large tech stocks. Core inflation in the U.S. unexpectedly slowed to 0.1% last month — below the expectations of all surveyed economists. It is assumed that companies are looking for ways to limit the extent to which they pass on higher tariff-related costs. Following the news, Trump reiterated that the Federal Reserve should cut interest rates by one percentage point. According to swap market data, traders now estimate a 75% chance that the Fed will lower rates by September. On the trade negotiation front, Trump stated that a deal with China is “done” and now awaits approval from Xi Jinping. The U.S. will receive a total of 55% in tariffs — 10% base, 20% on fentanyl, and about 25% from previously existing tariffs. China will receive 10%. In Europe, indices declined slightly, remaining within the bounds of sideways consolidation. According to Bloomberg, the EU expects trade negotiations with the U.S. to extend beyond Trump’s July 9 deadline. This morning, futures are declining: S&P 500 by 0.3%, Stoxx 600 by 0.7%, and DAX by 0.8%. Hong Kong and Japan indices are also down by 0.6–0.9%. Yesterday, oil jumped 4.3%, reaching $70 per barrel for Brent. The trigger was Trump’s statement about reduced confidence in nuclear talks with Iran. However, this morning prices are correcting and currently trading at $69.3.
Bonds. The yield on 10-year U.S. government bonds declined yesterday, and their prices rose following the inflation report. Emerging market bonds also showed strong performance.
KASE Index. Yesterday, the KASE Index rose by 0.5% and closed near resistance levels, which are likely to be tested again today.
Index Stocks. Kaspi.kz led the gains yesterday, rising 1.2%. The stock is rebounding after hitting a one-and-a-half-year low on June 2. A strong resistance level lies ahead along the downward trendline from the July 22, 2024 peak. Bank CenterCredit shares rose by 1.1%, which didn’t alter the overall technical picture, though the trading volume spiked to 302 million tenge. KMG shares added 1% on the back of higher oil prices. Of note was Kazakhtelecom’s dividend announcement, with payouts scheduled from June 13 to 18. Given the high per-share dividend this year and reduced long-term prospects following the sale of Altel/Tele2, we expect part of the investment income to be reallocated to other index stocks. Likely candidates include dividend-paying and growing shares of Halyk Bank, oversold Kaspi, and long-term attractive Kazatomprom.
Currency. Yesterday, the dollar strengthened to 510.5 tenge. The USDKZT chart still shows no breakout from local consolidation. During today’s session, the exchange rate is fluctuating near yesterday’s closing level.