RTTNews - The Malaysian stock market on Tuesday saw an end to the three-day winning streak in which it had collected a modest 8 points or 0.6 percent. The Kuala Lumpur Composite Index remains above the 1,185-point plateau, although now analysts are predicting that the market may fall through that level of support at the opening of trade on Wednesday.
The global forecast for the Asian markets is fairly pessimistic as investors are likely to be cautious ahead of the Federal Open Market Committee's comments on Wednesday about the state of the U.S. economy. Financials and properties are likely to be under pressure, along with some of the resource stocks. The European and U.S. markets finished sharply lower, and the Asian bourses are also expected to trade to the downside.
The KLCI finished slightly lower on Tuesday, as selling among the industrial stocks was largely offset by gains among the financials and the plantations.
For the day, the index eased 1.72 points or 0.15 percent to close at 1,186.28 after trading between 1,184.08 and 1,188.98. Volume was 1.155 billion shares worth 1.643 billion ringgit. There were 477 gainers and 275 decliners, with 187 stocks finishing unchanged.
Among the gainers, KNM Group, LCL Corporation, RCE Capital, Axiata, Sime Darby and Bumiputra-Commerce all finished higher, while Maybank and Tenaga ended lower.
Wall Street offers a negative lead as stocks posted notable losses on Tuesday, with traders doing some additional profit taking ahead of key economic data due out in the second half of the week. The major averages all ended the day firmly in negative territory, adding to the moderate losses posted in the previous session.
On the economic front, traders largely shrugged off the Labor Department's report showing a much bigger than expected increase in productivity in the second quarter. The growth came as hours worked fell at a faster pace than output. At the same time, the report also showed a steep drop in unit labor costs. The report said that productivity increased by 6.4 percent in the second quarter compared to a downwardly revised 0.3 percent increase in the first quarter. Economists had expected productivity to increase by 5.5 percent.
Meanwhile, the Labor Department also said that unit labor costs fell by 5.8 percent in the second quarter following a revised 2.7 percent decrease in the first quarter. The steep drop in costs exceeded the expectations of economists, who had expected a 2.5 percent drop.
Separately, the Commerce Department released a report showing that wholesale inventories fell by much more than expected in the month of June, although the report also showed a modest increase in wholesale sales. The report showed that wholesale inventories fell 1.7 percent in June following a revised 1.2 percent decrease in May. Economists had expected inventories to fall 0.9 percent compared to the 0.8 percent drop originally reported for the previous month.
Traders are also looking to the two-day Federal Open Market Committee meeting that began today, although the Fed's rate decision is not expected to be revealed until tomorrow afternoon. The central bank is widely expected to keep the fed funds futures rate unchanged. However, the Fed's commentary on growth and inflation and any additional information on quantitative easing measures have the potential to move the markets.
The major averages all ended the day notably lower, although they were well off their worst levels of the day. The Dow closed down by 96.50 points or 1 percent at 9,241.45, the NASDAQ slipped by 22.51 points or 1.1 percent to 1,969.73 and the S&P 500 fell by 12.75 points or 1.3 percent to 994.35.
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