Global: The dollar fell 0.42% to 98.701 following improving trade optimism after President Trump highlighted that trade talks have been positive and that China is also willing to reach an agreement to prevent further escalation of the trade tension. Besides, September CPI and core CPI matched August’s pace at 1.7% y/y (cons: 1.7%) and 2.4% y/y (cons: 2.4%). We believe the weak readings in both inflation reports will likely boost both our and investors’ expectations for an October Fed rate cut. The minutes from the Federal Reserve’s September meeting released recently suggest that central bank officials were concerned about slowing global growth and rising trade policy uncertainty. Thus, the Dow climbed by 0.57% to 26,497 while the S&P500 rose 0.64% to 2,938. Owing to the risk-on sentiment, the UST10-year yields added 8.45bps to 1.668%. Gold prices fell 0.77% to US$1,493.99/oz. The pound surged 1.94% to 1.244 driven by positive Brexit comments from Republic of Ireland’s leaders during the UK PM’s meeting with his Irish counterpart. The euro rose 0.31% to 1.101. The yen fell 0.47% to 108.0 due to weaker economic release i.e. machinery orders at -14.5% y/y in September (Aug: +0.3%, cons: -10.8%). The Chinese yuan added 0.23% to 7.116.

Crude commodity prices rose with Brent up 1.34% at US$59.10/bbl while WTI gained 1.83% to US$53.55/bbl following Opec’s cut on its global oil demand growth forecast for 2019 to 0.98 million barrels per day (b/d), down 40,000 b/d from its September estimate. Global demand for Opec crude will average 29.6 million bpd, a drop of 1.2 million bpd from 2019. Opec left unchanged its 2020 forecast that global oil demand would grow in 2020 by 1.08 million bpd. Supply from non-Opec producers will expand by a much faster 2.2 million bpd. We feel this will keep up the pressure on Opec and its allies to avoid a larger surplus next year. It will likely intensify pressure on Opec to impose a deeper round of production cuts at its December meeting due to a further drop in demand and higher supply from rivals like the US.

Malaysia: The MYR rose by 0.23% to 4.190. The KLCI gained 0.04% to 1,551.9. In the MGS market, trading activity was lacklustre as market players stayed on the sidelines ahead of Budget 2020. The MGS 5-year tenure closed lower by 2.5bps to 3.220% while the 10-year added 1bps to 3.400%. Meanwhile, the 3- and 7-year yields were unchanged at 3.125% and 3.355%, respectively. The MYR strengthened, by 0.18% to 5.128 vs. the GBP and 0.62% to 3.880 vs. the JPY while it weakened 0.23% at 4.620 vs. the EUR and 0.06% at 1.699 vs. the CNY. Regionally, the MYR rose mostly; (THB) 0.49% to 7.265, (IDR) 0.01% at 3,377.5, (PHP) 0.04% to 12.3 and (VND) 0.18% to 5,538.4. It fell against the SGD by 0.12% at 3.043

MYR outlook: We expect the MYR to trade between the support levels of 4.1768 and 4.1806 while our resistance is pegged at 4.1924 and 4.1967. Today’s focus will be on Budget 2020. We expect the budget will continue to focus on consolidating the fiscal deficit/GDP to 3.0% in 2020 from -3.4% in 2019 and at the same time ensure the economy grows at a credible pace supported by domestic activities, namely construction/infrastructure, tourism besides focusing on the B40 Group.

Source: AmInvest Research - 11 Oct 2019