• Tight labour market may nudge Fed to tighten faster

Global Highlights

Dollar Index – The dollar index fell 0.66% to 101.82 as labour market indicators are showing signals for further policy tightening. Private businesses in the US added 128K more workers in May of 2022, the lowest addition since job losses in 2020 (cons. 300K). The number of new claims for unemployment benefits dropped to 200K last week, from the previous week's 211K (cons. 210K). Both indicators are signalling a tight labour market in the US.

US equities & sovereign bonds – Wall Street snapped its two-day decline as the Dow Jones rose 1.33% to 33,248, S&P 500 added 1.84% to 4,177, while the Nasdaq surged 2.69% to 12,317. The UST10Y yield added 0.2bps to 2.908% while the UST2Y yield fell 1.2bps to 2.630%, making the yield differential between the two to increase to 27.8bps.

Euro – The euro jumped 0.91% to 1.075. April’s producer price inflation rate in the Euro Area surged to 37.2%, a new record high, and above the 36.9% in March. This will put more pressure on the ECB to tighten its purse as the inflation has not peaked yet in the Euro Area.

British pound – The pound rose 0.73% to 1.258. Investors remained concerned about rampant inflation and tightening financial conditions amidst slowing global growth.

Japanese yen - The yen strengthened 0.22% to 129.84. The currency remained depressed by the widening stance between the BoJ and other global central banks despite some easing restrictions on foreign tourists.

Chinese yuan – The yuan appreciated 0.39% to 6.660. Beijing has ordered state-owned banks to set up an 800bil yuan credit line for infrastructure projects as officials are pushing the construction sector to revive the pandemic-ravaged economy. This may also become another factor that can push the Chinese yuan weaker amidst global central banks rolling back their stimulus measures.

Korean won – The won weakened 0.50% to 1,252. The S&P Global South Korea Manufacturing PMI declined to 51.8 in May from 52.1 in the previous month, marking its 20th straight months of growth. Output and new exports contracted due to Covid-19 restrictions in China and Ukraine-Russia war.

Australian dollar – The Aussie dollar went up 1.25% to 0.727. According to data, Australia’s trade surplus climbed to A$10.5 billion in April, up from A$9.7 billion as exports grew 1.0% m/m while imports fell 0.7% m/m.

Commodities Highlights

Crude oil – The oil market was further fuelled by uncertainties as OPEC+ agreed to raise output by a larger-than-expected 648K barrels per day in both July and August. But this will not be enough to compensate for the potential loss from Russia oil sanctions. Brent surged by 1.14% to US$117 while WTI dropped 1.40% to US$116 per barrel.

Gold – The gold price increased 1.19% to US$1,868/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit weakened further by 0.15% to 4.390, almost touching the two-year low. The government has extended the price ceiling for chicken and chicken eggs sold in Malaysia up until the end of June from the previous 5 June mark. This will help put price inflation in check for the whole month of June.

KLSE – The FBM KLCI closed lower again as it lost 0.23% to 1,550, dragged by the energy and healthcare sectors. Detailed transactions showed that foreign investors were net sellers with RM67.3mil, while both local institutions and retailers were net buyers with RM56.8mil and RM10.5mil, respectively.

Fixed Income – The MGS benchmark was mixed when the 3-year +1.5bps to 3.495%, 7-year +3.5bps to 4.125%, but the 5-year -1.0bps to 3.770% while the 10-year was unchanged at 4.240%.

Rates – The IRS yield for (3Y) +1.0bps to 3.615%, (5Y) +1.5bps to 3.815%, (7Y) +5.8bps to 3.955%, and (10Y) +6.0bps to 4.090%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.3750 and 4.3850 while our resistance is pinned at 4.4000 and 4.4100

Source: AmInvest Research - 3 Jun 2022