• PMI for most economies drop, but still above the expansion level

Global Highlights

Dollar Index – The dollar posted a 0.21% decline to 101.857. Federal Reserve Bank of Atlanta president Raphael Bostic, who is not a voting member in the FOMC, said that he will back the Fed chair’s decision for further half percentage point hikes in the future. Nonetheless, he advised that the Fed should pause its tightening cycle in September to reevaluate the economy, since the faster rate hike could lead to a serious misallocation in the economy.

US equities and sovereign bonds – Wall Street was mixed with the Dow Jones rising 0.15% to 31,929, the S&P 500 gained 1.86% to 3,974 while the Nasdaq fell 2.35% to 11,264. The yield differential between the UST10 and MGS10 was around 147.54bps Also, the yield differential between the UST10 and UST2 was 27.19bps where the UST10 was at 2.75% and the UST2 at 2.48%.

Euro – The euro gained 0.42% to 1.074. Business activity in the Eurozone was slower in recent months amid the conflict in Ukraine and high energy prices. The latest PMI dropped to 54.9 in May from 55.8 in Apr 2022, still above the expansion level. Growth in demand for services is slowing down as sentiment deteriorated, especially with concerns on prices.

British pound – The pound slid 0.44% to 1.253. The UK services PMI tumbled to 51.8 in May from 58.9 in Apr 2022, still above the expansion level, but reached the lowest level since the pandemic. Survey respondents noted that the economic and geopolitical uncertainty contributed to the slowdown. High input prices were also a concern.

Japanese yen – The yen was 0.84% stronger to 126.830. Manufacturing activity in Japan dipped slightly to 53.2 in May from 53.5 in Apr 2022. Reasons for the slowdown include supply bottlenecks on parts’ shortages due to China’s lockdown which weaken output and new orders growth.

Chinese yuan – The yuan slid 0.06% to 6.654. Addressing the economic ramification from the lockdown, Chinese authorities pledged more assistance for both households and businesses, including increasing the annual tax cut by around CNY140bil., boosting infrastructure spending, and offering tax rebates for businesses affected.

Korean won – The won slipped 0.14% to 1,265.990. The new Bank of Korea governor commented that he will opt for a higher interest rate in the next monetary policy meeting to combat inflation in South Korea, which is currently at 4.8% in Apr 2022, the highest for the past 13 years.

Australian dollar – The Aussie dollar slid 0.04% to 0.711. Australia’s manufacturing PMI was slightly lower at 55.3 in May from 58.8 in Apr 2022 while the services PMI also fell to 53.0 in May 56.1 in Apr 2022. Similar to other economies, concerns on prices are top on the list. Other reasons for the decline were related to supply chain disruptions and poor weather.

Commodities Highlights

Crude oil – Brent was higher by 0.12% at US$113.56 per barrel, while WTI closed lower by 0.47% to US$109.77 per barrel.

Gold – The gold price was up 0.38% to US$1,853.59/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit depreciated by 0.15% to 4.396. Despite concerns on high prices, Finance Minister Tengku Zafrul reaffirmed that Malaysia’s economy is heading in the right direction, after growing by 5.0% in the first quarter.

KLSE – The FBM KLCI closed lower by 0.73% to 1,531. Local institutions and local retailers were net buyers at RM87.0mil and RM75.9mil respectively. Foreign investors were net sellers at RM162.9mil.

Fixed Income – The MGS benchmark for the 3-year was unchanged 3.485%, 5- year up by 3.0bps to 3.750%, 7-year down 2.0bps to 4.075%, and 10-year down 1.5bps to 4.230%.

Rates – The IRS yield for (3Y) was 5.5bps higher at 3.610%, (5Y) 7.5bps higher at 3.795%, (7Y) up 5.0bps to 3.9656%, and (10Y) up 6.0bps to 4.140%.

Against major currencies – The ringgit slid against the EUR, GBP, JPY, SGD, THB, IDR, PHP and VND, but gained against the AUD and 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 - 25 May 2022