• Most PMI readings suggest bearish outlook due to supply chain-related reasons, higher commodity prices and geopolitical conflicts

Global Highlights

Dollar Index – The Dollar Index was up 0.33% to 98.632. The US labour market improved further, with around 431,000 jobs added, and pushing down the unemployment rate down to 3.6% in March 2022. The latest number suggested that the labour market is tight and inching close to normal. Given this improvement, we foresee the Fed making another 4 interest rate hikes, with the next one a 50bps increase.

US equities – US stocks were mixed with the Dow Jones rising 0.4 % to 34,818, S&P 500 down -1.57% to 4,530, and the Nasdaq up 0.29% to 14,262. On US Treasuries, the spread between the 10Y and 2Y was around 7.59bps.

Euro – The euro was down 0.22% to 1.104. Inflation in the Eurozone worsened, as the latest headline inflation jumped to 7.5% in March 2022 from 5.9% in February 2022. The main impetus for the surge was energy prices, which soared 45% y/y, due to the Russia-Ukraine conflict that propelled oil and gas prices.

British pound – The pound added 0.03% to 1.314. The UK manufacturing growth signalled expansion but weakened further to 55.2 in March 2022 from 58 in February 2022 based on S&P Global PMI. The bearish outlook was reflecting further supply chain issues, including higher input and output costs as a result of geopolitical conflict in the continent and Brexit. If this situation continues, we foresee that consumer inflation will stay relatively higher in the UK for the next several months.

Japanese yen – The yen slid 0.67% to 122.520. Economy, Trade and Industry Minister Koichi Hagiuda said that Japan could expand its fuel subsidy programme, in response to the high energy costs in the past months. On the sentiment front, the Tankan survey showed that Japanese business sentiment deteriorated due to the higher commodity prices and crisis in Ukraine.

Chinese yuan – The yuan was down 0.36% to 0.784. The business sentiment in China slumped, based on latest PMI numbers that fell to 48.1 in March from 50.4 in February 2022. The deterioration was due to several factors, but primarily driven by the resurgence in Covid-19 cases domestically which triggered a wide-scale lockdown due to China’s zero-tolerance policy.

Korean won – The won shed 0.19% to 1211.900. On the macro front, South Korea’s trade performance for March was strong, where exports increased 18.2% y/y, and imports climbed 27.9% y/y. The main driver for the high exports was semiconductors, which increased 38.0% y/y, reflecting the strong external demand for chips.

Australian dollar – The Aussie dollar weakened 0.36% to 0.748. The Australian manufacturing PMI increased slightly from 57.0 in February 2022 to 57.7 in March 2022. The expansion reflected higher demand, hiring, and purchasing activities. Nonetheless, the survey suggested that issues related to supply constraints and price pressure are dampening overall business confidence.

Commodities Highlights

Crude oil – Brent was down 3.26% to US$104.39 per barrel and WTI also lost 6.99% to US$100.28 per barrel.

Gold – Gold shed 0.61% to US$1,925.68 per oz.

Malaysia Highlights

Malaysian ringgit – The ringgit slid 0.21% to 4.213. The latest PMI reading fell from 50.9 in February 2022 to 49.6 March 2022. The bearish outlook among businesses was due to weakening demand amid a resurgence in Covid-19 cases, higher input prices and supply shortages. Businesses however, displayed optimism as national and international pandemic restrictions are lifted although the situation Ukraine could still push up prices and lead to supply shortages.

KLSE – The FBM KLCI closed 0.95% higher at 1,602. Detailed transactions showed that local institutions and local retails were net sellers with RM113.8mil and RM81.0mil respectively, while foreign investors were net buyers with RM194.8mil.

Fixed Income – The yield for the 3-year was up 1.5bps to 3.190%, 5-year up by 4.0bps to 3.430%, the 7-year up by 3.0bps to 3.810%, and the 10-year up by 2.0bps to 3.900%.

Rates – The IRS yields for the (3Y) was down by 4.0bps to 3.075%, (5Y) up 8.0bps to 3.440%, (7Y) up 3.5bps to 3.575%, and (10Y) up 4.0bps to 3.770%. KLIBOR remained at 1.970%.

Against major currencies – The ringgit weakened against the GBP, CNY, IDR, PHP and VND, while gaining against the EUR, AUD, JPY, SGD and THB.

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.2000 and 4.2030 while our resistance is pinned at 4.2500 and 4.2530.

Source: AmInvest Research - 4 Apr 2022