Global: The dollar rose 0.16% to 98.454 as the trade optimism story was short-lived following reports citing China wants to have additional trade talks before signing what President Trump characterized as a "very substantial phase one deal". To recap, the phase one deal includes China purchasing US$40–US$50bil of US agriculture goods and addressing intellectual property rights issue. In return, the US agreed to hold off on a tariff hike that was scheduled this week. As a result, both the Dow and S&P500 fell 0.11% to 26,787 and 0.14% to 2,966, respectively. The UST10-year yields remained unchanged at 1.729% while gold prices rose 0.28% to US$1,493/oz.
The euro weakened by 0.14% to 1.103 due to a stronger dollar. The pound depreciated by 0.47% to 1.261 as expectations for a Brexit deal recedes after European officials said obstacles remained on how to manage trade and customs between EU members Ireland and Northern Ireland, which is a part of the United Kingdom. Separately, the key focus on the Brexit front would be whether or not a deal can be reached before Thursday’s summit of European leaders. The Japanese yen slipped 0.10% to 108.4 as the market was shut for a public holiday. The Chinese yuan rose 0.31% to 7.068, riding on initial excitement of a partial trade deal. But it was hurt by the weak trade data (see Economics highlights below).
Crude oil prices fell sharply. Both Brent and WTI dropped by 1.92% to US$59.35/bbl and 2.03% to US$53.59/bbl, respectively as a lack of details about the first phase of a trade deal between the US and China undercut optimism over a trade relations. However, there are also worries that further escalation along the Syrian and Turkish border could affect output or exports from Iraq, providing more support for oil prices.
Malaysia: The MYR fell slightly by 0.05% to 4.189. The KLCI gained 0.69% at 1,567.6, in line with its regional peers and partly due to positive sentiments brought on by the newly-announced Budget 2020. The MGS market was rather subdued with tepid selling pressure seen on the 7- and 10-year with yields adding 0.5bp at 3.370% and 1bp to 3.425%, respectively. Meanwhile, the 3- and 5-year yields remained unchanged at 3.120% and 3.220%. The main focus for the day was the reopening auction of the GII 20Y which closed strongly this time after a string of weak auctions in the recent period. The BTC was high at 3.320x on the back of a RM2.0bil issuance with an additional RM0.5bil of private placement. The IRS climbed, adding: (1Y) 1.7bps to 3.238%, (3Y) 1.8bps to 3.228%, (5Y) 3.5bps to 3.295%, (7Y) 2.5bps to 3.325%, and (10Y) 3bps to 3.400%. The 3-month KLIBOR stood firm at 3.38%.
Against the major currencies, the MYR rose 0.03% to 3.864 vs. the JPY but fell by 0.16% to 4.617 vs. the EUR, 0.63% at 5.266 vs. the GBP and 0.35% at 1.687 vs. the CNY. Among our Asean peers, the MYR weakened mostly; (SGD) 0.34% at 3.057, (THB) 0.01% at 7.260, (IDR) 0.03% at 3,375.8, (PHP) 0.07% to 12.32 and (VND) 0.07% to 5,539.3.
MYR Outlook: The MYR is projected to trade between our support levels of 4.1720 and 4.1785 while our resistance is pegged at 4.1942 and 4.2007.
China – Envisage slower recovery in exports
Both the import and export data for September continued to deteriorate, hurt by the ongoing trade friction with the US. Based on USD terms, exports fell 3.2% y/y while imports dropped 8.5% y/y in September (the fifth consecutive month). Trade surplus with the US narrowed to US$25.88bil in September from US$26.96bil in August, but improved against the rest of the world minus the US by 2.8% y/y.
Singapore – Regulated move by MAS
As expected, the Monetary Authority of Singapore (MAS) eased its monetary policy by reducing the pace of the Singapore dollar’s appreciation “slightly” and has left the window open for another such shift if global growth continues to weaken next year.
China
Envisage slower recovery in exports
Source: AmInvest Research - 15 Oct 2019