• Chicago Fed survey suggests US economic activity slows down in March

Global Highlights

Dollar Index – The dollar posted a 0.53% increase to trade around 101.752. A survey by the Federal Reserve Bank of Chicago showed that the US economy expanded in March to 0.44, but still below February’s reading of 0.54. Reasons for the lower number were slower manufacturing activity and hiring activities. However, contribution to sales, orders and inventories did improve in March.

US equities and sovereign – Wall Street was mixed with the Dow Jones gaining 0.70% to 34,049, the S&P 500 down 2.77% to 4,272 and the Nasdaq sliding 2.55% to 12,839. The yield differential between the UST10 and MGS10 was around 144bps where the latter was at 4.59%. Also, the yield differential between the UST10 and UST2 has narrowed to 19.41 bps where the UST2 was at 2.6257%

Euro – The euro declined 0.71% to 1.071. On the political front, the financial market took a breather as the French presidential results saw Emmanuel Macron edging the far-right Marine Le Pen.

British pound – The pound dipped 0.75% to 1.274. According to the Confederation of British Industry’s survey, manufacturing companies in the UK have raised prices at the fastest pace due to surging input and energy costs. This was also coincided with the increasing consumer prices in the UK, that rose to 7.0% in March 2022, suggesting that there was price transfer from producers to consumers.

Japanese yen – The yen gained 0.28% to 128.14. The Japanese government has allocated around ¥6.2 trillion for subsidies and other measures for households and businesses to cushion from the impact from surging energy and raw material prices. Meanwhile, the Bank of Japan is expected to maintain interest rates at the current level despite the depreciation of the yen.

Chinese yuan – The yuan slid 0.89% to 6.559. China’s state-owned banks have lowered deposit rates for their consumers, in line with the government’s effort to boost the economy. This was a response to the surge of confirmed cases since last month, and large-scale lockdowns that dampen growth prospect.

Korean won – The won shed 0.88% to 1250.08. The Bank of Korea governor said that surging prices in Korea are more worrisome than the slowing economic growth. The pace of the interest rates hike however, according to the governor, still depends on the current data.

Australian dollar – The Aussie dollar weakened 0.91% to 0.718. Domestic politics dominated the news in Australia as the election is less than a month away. The current prime minister has promised that there will be no new taxes imposed in the next four years if his government is re-elected.

Commodities Highlights

Crude oil – Brent fell 4.06% to US$102.32 per barrel and WTI was also down by 1.66% to US$102.07 per barrel. Oil prices continued to weaken as there was a growing fear on further large-scale lockdowns in China.

Gold – The gold price declined 1.75% to US$1,897.83/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit depreciated 0.74% to 4.357. On the macro front, Malaysia’s Leading Index recorded a negative growth of 0.5% y/y, suggesting that growth momentum could be easing. Moving forward, the tension in Ukraine and China’s zero-Covid policy will dampen external demand, thus affecting Malaysia through trade.

KLSE – The FBM KLCI gained 0.23% to 1,602. Trading activities on Monday saw net selling from local institutions and foreign investors at RM18.4mil and RM44.3mil respectively. Local retailers were net buyers at RM62.7mil.

Rates – The IRS yield for the (3Y) was up 6.5bps to 3.435%, (5Y) +6.0bps to 3.765%, (7Y) +12.5bps to 4.055%, and (10Y) +8.5bps to 4.270%.

Against major currencies – The ringgit lost against the EUR, JPY, SGD, THB, IDR, PHP and VND, but gained against the GBP, AUD, and CNY.

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.2698 and 4.2851 while our resistance is pinned at 4.4000 and 4.4200

Source: AmInvest Research - 26 Apr 2022