RTTNews - The Malaysian stock market on Wednesday snapped the two-day losing streak that had cost it only four points or 0.38 percent along the way. Now resting at a nine-month closing high, the Kuala Lumpur Composite Index cracked resistance at 1,080 points, although investors are preparing for a mild retreat at the opening of trade on Thursday.
The global forecast for the Asian markets is mildly negative as stocks could see a bit of a correction following major gains in the previous session. Mixed economic data and corporate news does little to reinforce sentiment - although the auto stocks could be in focus after Chrysler finalized its deal with Fiat. Commodities also may provide support. The European markets ended sharply higher, while the U.S. markets ended slightly in the red - and the Asian bourses are tipped to follow the latter lead.
The KLCI finished sharply higher on Wednesday, thanks to large gains in the financial sector - while the industrials and plantations ended with more modest gains.
For the day, the index jumped 11.18 points or 1.04 percent to close at the daily high of 1,082.97 after falling as low as 1,072.69. Volume was 2.21 billion shares worth 1.829 billion ringgit. There were 613 gainers and 144 decliners, with 189 stocks finishing unchanged.
Among the actives, Iris Corp, KNM Group, Kumpulan Hartanah Selangor, Sime Darby and Maybank all finished higher, while Compugates, Tenaga and Telekom closed flat.
The lead from Wall Street is modestly negative as stocks showed a notable downturn following a strong start on Wednesday amid waning buying interest and disappointing results from a 10-year note auction. Nonetheless, the major averages were able to finish only slightly lower, as some traders picked up stocks at reduced prices later in the session.
The Treasury Department's auction of $19.0 billion worth of ten-year notes drew a higher than expected yield of 3.99 percent, raising concerns about the outlook for interest rates. At the same time, the bid-to-cover ratio, an indicator of demand, rose to 2.62 from 2.47 during the previous ten-year note auction in May. The bond market has been in focus recently, as traders have expressed concerns that interest rates have continued to rise despite the Federal Reserve's efforts to keep rates low through quantitative easing.
On the economic front, the Federal Reserve's Beige Book report indicated that conditions remained weak or deteriorated further during the period from mid-April through May. However, five of the twelve Fed districts noted a moderation in the downward trend, mitigating some market pessimism. While the Beige Book also said that contacts from several Fed districts indicated an improvement in their expectations, they do not see a substantial increase in economic activity through the end of the year.
Separately, a report from the Commerce Department showed that the U.S. trade deficit for the month of April came in modestly wider than in March, as the value of exports fell by more than the value of imports. The report showed that the trade deficit widened to $29.2 billion in April from a revised $28.5 billion in March. Economists had expected the deficit to widen to $29.0 billion from the $27.6 billion originally reported for the previous month.
In corporate news, the Supreme Court allowed the sale of Chrysler's assets to Italian automaker Fiat to move forward. In lifting a stay on the sale, the high court rejected a move by a group of plaintiffs, including three Indiana public pension organizations, to block the sale. Chrysler and Fiat have since closed their deal on Tuesday morning.
Meanwhile, the House Oversight and Government Reform Committee said it has subpoenaed the Federal Reserve for documents, including e-mails to and from Fed Chairman Ben Bernanke, to explore the genesis of Bank of America's December purchase of Merrill Lynch. On Thursday, the committee will host Ken Lewis, former Chief Executive Officer of Bank of America, as part of a growing investigation into whether government officials pressured the bank to withhold details about the deal from investors despite ballooning losses at the brokerage firm.
The major indices pared some of their losses late in the session but remained stuck in the red. The Dow closed down 24.04 points or 0.3 percent at 8,739.02, the NASDAQ closed down 7.05 points or 0.4 percent at 1,853.08 and the S&P 500 closed down 3.28 points or 0.3 percent at 939.15.
In economic news, Malaysia's industrial output dropped 11.4 percent year-on-year in April after a revised 12.7 percent decline in March, the Department of Statistics said Wednesday. Economists expected a fall of 14 percent. Annually, manufacturing output contracted 15.7 percent in April compared to a revised 17.1 percent drop in March. At the same time, mining and electricity production declined 2.9 percent each in April.
Month-on-month, industrial output slipped 0.3 percent in April, mainly due to a 5.8 percent drop in mining output. However, manufacturing and electricity production rose 1.5 percent and 8.8 percent respectively in April. In the January to April period, industrial output declined 13.7 percent compared with the corresponding period in the previous year.
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