• Inflation in Japan edges up to 2.5% in April 2022

• Australia’s Labor wins general election

Global Highlights

Dollar Index – The dollar posted a 0.41% rise to 103.150. The latest survey showed that small businesses in the US are pessimistic on the economy due to surging prices, supply chain issues, shortage of workers and higher financing costs. Meanwhile, the White House advisor said that pushing inflation low should be a priority and believe that the economy is stable and resilient.

US equities and sovereign bonds – Wall Street was mixed with the Dow Jones inching up 0.03% to 31,262, the S&P 500 up 0.01% to 3,901 while the Nasdaq fell 0.30% to 11,355. The yield differential between the UST10 and MGS10 was around 158.69bps Also, the yield differential between the UST10 and UST2 was 20.04bps where the UST10 was at 2.78% and the UST2 at 2.58%.

Euro – The euro lost 0.23% to 1.056. Consumer confidence in the Eurozone in May edged up from -22.0 to -21.1, despite the situation in Ukraine that pushed up energy prices and dampen economic outlook. The big picture however tells that consumer confidence remains around the pandemic levels.

British pound – The pound gained 0.10% to 1.248. On the macro front, retail sales in the UK jumped by 1.4% m/m after declining in both Feb 2022 and Mar 2022. The prime reason was an increase in supermarket sales that drove spending, suggesting that people were buying more and staying inside to save money. Sales of clothing were also strong, as summer is approaching. Overall, confidence among consumers was still low, amid concerns on the surging cost of living.

Japanese yen – The yen slipped 0.07% to 127.880. Japan’s overall inflation increased to +2.5% in Apr 2022, making this the first time since 2015 that inflation rose above the Bank of Japan’s inflation target of +2.0%. The reason for the high inflation was high import cost due to the depreciation of the yen recently, and higher global commodity prices.

Chinese yuan – The yuan added 0.29% to 6.693. The Covid-19 situation in China has slightly improved as authorities removed some of its stringent policies. In Shanghai, public transportation has been resumed after a two month suspension. In other cities such as Beijing however, strict policies are still in place, where only essential services such as restaurants and pharmacies are allowed to operate, while workers in other sectors are required to work from home.

Korean won – The won was up 0.76% to 1,268.020. On the macro front, producer inflation in South Korea rose from +9.0% in Mar 2022, to +9.2% in Apr 2022. So far this year, producer price inflation has been averaging around +8.9%, which is higher relative to last year’s average of +6.4%. The increase in the energy-related segment was driven by electric power, gas, water & waste as the producer inflation surged 16.0% y/y in Apr 2022.

Australian dollar – The Aussie dollar slid 0.13% to 0.704. The Australian Labor Party won the general election during the weekend, garnering 73 seats. Prime Minister-elect Anthony Albanese has vowed to address key issues concerning the rising cost of living in Australia, climate change and Australia’s foreign relations in Asia.

Commodities Highlights

Crude oil – Brent was higher by 0.46% at US$112.55 per barrel, and WTI also climbed by 0.91% to US$113.23 per barrel.

Gold – The gold price was up 0.25% to US$1,846.50/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit improved 0.35% to 4.389. The International Monetary Front (IMF) remains upbeat on Malaysia’s economy, expecting the economy to expand by 5.8% in 2022. The main reason for the upbeat outlook was the high vaccination rate and less stringent Covid-19-related restrictions. The forecast is slightly above of our base case of 5.6%.

KLSE – The FBM KLCI closed lower by 0.02% to 1,549. Local institutions were net sellers at RM63.0mil. Local retailers and foreign investors were net buyers at RM5.5mil and RM57.6mil respectively.

Fixed Income – The MGS benchmark for the 3-year was lower by 8.0bps to 3.540%, 5-year down by 10.0bps 3.780%, 7-year down 17.0bps to 4.200%, and 10-year down 5.0bps to 4.360%.

Rates – The IRS yield for (3Y) was 6.0bps lower at 3.615%, (5Y) 12.5bps lower at 3.715%, (7Y) down 10.0bps to 3.920%, and (10Y) down 15.0bps to 4.075%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.3850 and 4.4150 while our resistance is pinned at 4.4200 and 4.4300

Source: AmInvest Research - 23 May 2022