• EU leaders agree to ban Russia oil import by end-2022

Global Highlights

Dollar Index – The greenback rose marginally by 0.08% to 101.75 as prospects of further elevated inflation spooked investors towards risk-off sentiment. On the data front, the S&P CoreLogic Case-Shiller 20-City Home Price Index surged 21.2% y/y in March 2022, marking a new record high (cons. 20%) and higher than the 20.3% growth in the prior month. However, the higher lending costs could depress the housing market as the Fed raises its key interest rate. For the month of May, the dollar was down 1.17%.

US equities & sovereign bonds – Wall Street was in the red amidst risk-off sentiment when the Dow Jones edged lower by 0.67% to 32,990, S&P 500 fell 0.63% to 4,132, and Nasdaq declined 0.41% to 12,081. The UST10Y added 10.6bps to 2.844% while the UST2Y was 2.557%, making the yield differential UST10/2 higher at 28.7bps.

Euro – The euro shed 0.42% to 1.073, near its more than one-month high and ended the month of May 1.79% higher. Inflation in the Eurozone rose to 8.1% y/y in May 2022, a new record high, from 7.4% and easily beating the market forecast of 7.7% y/y, driven mainly by the increase in energy prices. Core inflation rate, which excludes energy, food, alcohol & tobacco, broke a new record as well as it jumped to 3.8% from 3.5%.

British pound – The pound fell 0.40% to 1.260 despite the recent announcement of the UK’s Cost of Living Support package. By the end of May, the pound was 0.22% higher compared to end of April. Consumer credit rose by £1.4bil in April 2022, after a £1.3 billion rise in March as consumers are hit by inflation. Looking deeper, the growth rates of credit card borrowings reached its highest since 2005 at 11.6%.

Japanese yen – The yen weakened 0.85% to 128.67, pushing the currency 0.79% stronger compared to the end of April. The Consumer Confidence Index in Japan rose to 34.1 in May of 2022 from 33.0 in the previous month, the highest since February, after the government ended the quasi-state of emergency in Japan. Also, the unemployment rate slid to 2.5% in April, lower than March’s 2.6% while retail sales in Japan climbed by 2.9% y/y in April 2022 (cons.: 2.6%) and industrial production in Japan shrank 1.3% m/m in April (cons.: -0.2%).

Chinese yuan – The yuan weakened 0.16% to 6.672. For the month of May, the yuan was 0.96% weaker than end-April. China’s cabinet announced as many as 33 measures covering various policies to revitalize the pandemicdamaged economy following the lifting of some of the stringent Covid-related restrictions.

Korean won – The won strengthened slightly by 0.12% to 1,237. Compared to the end of April, the won was 1.48% stronger by the end of May. On the data front, South Korea’s economy remained healthy as its industrial production for April grew 3.3% y/y, albeit slower than the 3.7% growth in the previous month. On another note, South Korea's government is studying ways to reduce the tax burden such as the corporate income, inheritance, and gift tax burden and also additional measures to alleviate the surging living costs.

Australian dollar – The Aussie dollar lost 0.26% to trade at 0.718. The estimate for total building permit approved dropped by 2.5% m/m to in April, largely missing market consensus of a 2% growth. On monthly changes, the currency posted a 1.64% growth.

Commodities Highlights

Crude oil – Global oil prices were mixed as some oil producers mull over increasing its own production as they were also planning to suspend Russia’s participation in the OPEC+ production deal. On another note, EU leaders have agreed to ban 90% of Russia’s crude oil import by end-2022 after weeks of struggling to reach consensus. This will possibly put further constraint on the global oil supply. Brent was up 0.96% to US$122 per barrel while WTI fell 0.35% to US$114 per barrel.

Gold – The gold price fell 0.96% to US$1,837/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit pulled back slightly as it depreciated 0.24% to 4.377 and traded within the range of 4.3813 and 4.3667. Indonesia cancelled a plan to send its citizens to work in palm oil plantations in Malaysia which is already facing a labour shortage. On monthly changes, the ringgit was 0.51% weaker compared to end of April.

KLSE – The FBM KLCI was traded higher as it surged 1.75% to 1,570. Detailed transactions showed that foreign investors occupied most of the trades at 67.2% with RM320.8mil net buying flows. It was offset by selling flows from local institutions and retailers with RM284.0mil and RM36.8mil, respectively.

Fixed Income – The MGS benchmark yields treaded upward as the 3-year was +1.0bps to 3.470%, 5-year +5.5bps to 3.760%, 7-year +10.0bps to 4.050%, and 10-year +4.0bps to 4.200%.

Rates – The IRS yield for (3Y) was +5.0bps to 3.565%, (5Y) +4.0bps to 3.725%, (7Y) +1.5bps to 3.865% while the (10Y) +2.0bps to 4.050%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.3500 and 4.3560 while our resistance is pinned at 4.3920 and 4.3980

Source: AmInvest Research - 1 Jun 2022