• Fed’s Beige Book suggests growth is slowing down in most regions within the US economy

Global Highlights

Dollar Index – The dollar gained 0.73% to 102.498. The Fed’s Beige Book suggests that the US economy is continuing to expand at a moderate pace in most regions. Issues regarding high inflation, supply bottlenecks and uncertainty about growth prospects were the main challenges mentioned.

US equities and sovereign bonds – Wall Street was down, where the Dow Jones declined 0.54% to 32,813, S&P 500 lost 0.75% to 4,101, and Nasdaq slid 0.72% to 11,994. The yield differential between the UST10 and MGS10 was around 131.92bps Also, the yield differential between the UST10 and UST2 was 26.42bps where the UST10 was at 2.91% and the UST2 at 2.64%.

Euro – The euro was weaker by 0.78% to 1.065. The unemployment rate in the Euro Area was unchanged at 6.8% in April 2022. On the monetary policy front, ECB president Christine Lagarde said that she is open to the idea of using the ECB’s lending facilities to encourage the economy the transition to carbon neutrality.

British pound – The pound slid 0.91% to 1.249. The UK’s manufacturing PMI fell by 1.2 points to 54.6 in May 2022, pointing to a slower factory activity ahead. The slowdown was driven by weaker economic growth domestically, lower new exports order amid supply chain issues, and rising cost due to the war in Ukraine.

Japanese yen – The yen was 1.13% weaker to 130.130. Japan’s manufacturing PMI slightly dropped by 0.2 point to 53.3 in May 2022. The main reason for the decline was the increasing input costs due to high commodity and materials prices, China’s lockdown, and the war in Ukraine.

Chinese yuan – The yuan shed 0.22% to 6.686. The manufacturing PMI in China was slightly up by 2.2 points to 49.6 in May 2022, suggesting some improvement, but still below the expansion threshold. This is due to the effects of Covid-19-related lockdowns in major cities, including Shanghai.

Korean won – The won slipped 0.69% to 1,245.84. South Korea’s exports in May 2022 accelerated to 21.3% y/y, suggesting global demand was still strong amid issues regarding supply chain, war in Ukraine and slower economic activity in China.

Australian dollar – The Aussie slid 0.03% to 0.718. Australia’s GDP in the first quarter this year grew by 3.3% y/y, which is slower relative to the previous quarter’s growth of 4.4% y/y, but above consensus expectation. The main driver for growth was household spending which increased by 4.0% y/y, and government spending that expanded by 8.3% y/y. The main drag was exports of goods and services, which contracted by 4.2% y/y.

Commodities Highlights

Crude oil – Brent was lower by 5.33% at US$116.29 per barrel, while WTI closed higher by 0.51% to US$115.26 per barrel.

Gold – The gold price increased 0.50% to US$1,846.60/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit lost 0.14% to 4.383.

KLSE – The FBM KLCI closed lower by 1.06% to 1,553. Local institutions and local retailers were net sellers of RM39.2 mil and RM72.0 mil respectively. Foreign investors were net buyers of RM111.2 mil.

Fixed Income – The MGS benchmark for the 3-year was up by 1.0bps to 3.480%, 5-year up 1.0bps to 3.780%, 7-year up 4.0bps to 4.090%, and 10-year up 4.0bps to 4.240%.

Rates – The IRS yield for (3Y) was 4.0bps higher at 3.605%, (5Y) 7.5bps higher at 3.800%, (7Y) higher 3.2bps to 3.898%, and (10Y) lower 2.0bps to 4.030%.

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 4.3650 and 4.3750 while our resistance is pinned at 4.4000 and 4.4100

Source: AmInvest Research - 2 Jun 2022