Global: The dollar rose by 0.16% to 98.967 following concerns over the trade discussion between the US and China. The Chinese officials have expressed reluctance to hammer out a broad agreement when they meet US counterparts in Washington later this week. It appears that a deal will not include “commitments on reforming Chinese industrial policy” or “government subsidies”. The new round of trade talks between the US and China comes at the point where the Trump administration is embroiled with an intensifying impeachment inquiry, which may not directly impact investment sentiment in the US, but may be been seen by Chinese officials as weakening the president’s negotiating position.

Both the Dow and S&P500 fell by 0.36% to 26,478 and 0.45% to 2,939, respectively. The UST 10-year yields rose 2.9bps to 1.558% while gold prices slid 0.74% to US$1,493.5/oz.

The euro slipped by 0.07% to 1.097 partly due to stronger dollar as well as weakerthan-expected August Germany Factory Order which fell by 0.6%m/m from -2.1% m/m in July (cons: -0.3%) thus raising worries that the German economy will dip into a “technical” recession.

The pound dropped by 0.31% to 1.229 also partly due to stronger dollar and added with the ongoing Brexit noise where there are stories emerging that the UK prime minister may intend to challenge the Benn Act – a law that requires the PM to seek a delay for Brexit if the UK is unable to come with an agreed deal by 19 Oct in the Supreme Court.

The Japanese yen weakened by 0.30% to 107.26 due to stronger dollar and weaker August Leading Index which slowed to 91.7 from 93.7 in July.

Malaysia: The MYR fell by 0.17% to 4.192 partly due to a stronger dollar. But the KLCI rose 0.09% to 1,559. Looking at the local bond market, the MGS3-, 5-, 7-, and 10-year yields rose 2.5bps to 3.125%, 3.0bps to 3.240%, 9bps to 3.405%, and 14.0bps to 3.425% respectively. The focus was on the reopening of the 10-year MGS whereby the auction size was RM3.0bil that saw a weak BTC of 1.233x with a wide high–low range at 15bps and averaged at 3.407%. The IRS curve fell across except for the 5-year tenure which rose by 0.5bps to 3.275%, The 3-month KLIBOR rates remained unchanged at 3.38%. On the commodity front, Brent and WTI crude oil prices fell slightly by 0.03% to US$58.35/bbl and 0.11% to US$52.75/bbl, respectively due to risk-off environment.

MYR outlook: We expect the MYR to trade between the support level of 4.1837 and 4.1877 and resistance at 4.1970 and 4.2013

Source: AmInvest Research - 8 Oct 2019