• The US labour market continues to improve

Global Highlights

Dollar Index – The dollar posted a 0.09% decrease to trade around 103.66. The US economy continued to improve, where its non-farm payroll increased by 428,000 in April 2022, exceeding consensus’ expectation. The unemployment rate on the other hand, remained at 3.6%, the lowest level since the pandemic. The improvement suggested that the labour market is tighter and this justifies the Fed to continue its normalisation course.

US equities and sovereign – Wall Street was in a sea of red with the Dow Jones losing 0.30% to 32,899, the S&P 500 down 0.57% to 4,123 and the Nasdaq sliding 1.40% to 12,145 . The yield differential between the UST10 and MGS10 was around 133bps Also, the yield differential between the UST10 and UST2 was 39.57bps where the UST2 was at 2.73%

Euro – The euro gained 0.09% to 1.055. The European Central bank board member Fabio Panetta said that the economic recovery in the Euro Area was halted amid the ramping inflation. He suggested that the Euro economy now is in a de facto stagnation, meaning that monetary policy tightening to cool down inflation will hurt the economy that is still recovering.

British pound – The pound dipped 2.13% to 1.236. The Bank of England voting member Huw Pill said that Britain now has to accept that real income among household will be hit amid the high inflation in the UK. On the business side, companies now might also experience a smaller profit margin due to high input costs.

Japanese yen – The yen weakened 0.86% to 130.200. On the macro front, the Japanese government is looking to loosen the border control soon. The border easing will be welcomed as it will improve Japanese tourism that was severely affected by the pandemic while the weaker yen could increase foreign tourists’ appetite.

Chinese yuan – The yuan slid 0.16% to 6.667. Amid the Omicron-related outbreak and zero-Covid policy, the People’s Bank of China vowed to readjust its monetary policy to support the economy. Support measures include lending facility for the logistics and warehouse sectors that were severely affected by the outbreak. More credits will also be provided for small and micro enterprises, including those in tourism, retail and entertainment.

Korean won – The won shed 1.27% to 1,272.690. South Korea finance minister said that the country will take pre-emptive measures if necessary to keep the financial market calm after the half-percentage point hike by the Federal Reserve. Inflation in Korea continued to remain high at 4.8% in April, which means the Bank of Korea could continue to adjust its interest rates to keep inflation in check.

Australian dollar – The Aussie dollar weakened 0.51% to 0.708. The Reserve Bank of Australia (RBA) made the first interest rate hike in a decade by 25 basis points to 0.35%. This was a response to the latest inflation reading that jumped from 3.5% in the fourth quarter 2021, to 5.1% in the first quarter of 2022.

Commodities Highlights

Crude oil – Brent gained 1.34% to US$112.39 per barrel and WTI also up by 0.42% to US$108.26 per barrel.

Gold – The gold price increased 0.35% to US$1,883.81/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit depreciated 0.01% to 4.349. On the macro front, Bank Negara Malaysia’s monetary policy meeting will be held this Wednesday and Thursday (11 and 12 May), where we expect the OPR will stay at the current level. 1Q22 GDP numbers will be published this Friday, where our in-house projection is showing a growth of 6.5% for the first quarter of 2022.

KLSE – The FBM KLCI fell 1.18% to 1,564. Trading activities saw net selling from foreign investors at RM222.57mil. Local retailers and local institutions were net buyers at RM131.52mil and RM91.05mil respectively.

Fixed Income – The MGS benchmark for the 3-year was up 27.0bps to 3.825%, 5-year up 12.5bps to 4.145%, 7-year up 9.5bps to 4.590%, and 10-year up 10.0bps to 4.450%.

Rates – The IRS yield for the (3Y) was 24bps higher at 3.875%, (5Y) +21.5bps to 4.215%, (7Y) +24.5bps to 4.445%, and (10Y) +19.0bps to 4.600%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.3600 and 4.3900 while our resistance is pinned at 4.4000 and 4.4200

Source: AmInvest Research - 9 May 2022