• Covid cases in China’s major cities continue unabated

Global Highlights

Dollar Index – The dollar weakened 0.44% to 108.06 but is expected to continue to rally for the next few days prior the FOMC meeting on 26–27 July.

US equities & sovereign bonds – Wall Street gained where Dow Jones was up 2.15% to 31,288, S&P 500 gained 1.92% to 3,863 and the tech heavyweight Nasdaq jumped 1.79% to 11,452. The UST10Y benchmark yield continued to climb to 2.915%, while the UST2Y was at 3.132%, where the differential between these securities were -21.69bps.

Euro – The euro rose 0.62% to 1.008, but still the lowest level since mid-May weighed by the stronger dollar. Carmakers face close to 50% drop in sales as the number of new passenger cars in Europe hit a new low in June (since 1996), at 1.06 million vehicles. The ECB would likely announce its first rate hike since 2011, with a quarter-point increase later this month.

British pound – The pound added by 0.26% to 1.186. Amazon announced it would create over 4,000 jobs in the UK, in contrast to other major firms which have slashed jobs in anticipation of slowing economic growth.

Japanese yen – The yen firmed 0.28% to 138.570. Investors are betting that Japan will quit its ultra-loose monetary policy due to pressure on prices and a weaker yen for the past two months.

Chinese yuan – The yuan weakened by 0.02% to 6.757. Average new home prices in 70 major cities were unchanged in June after falling 0.1% and 0.2% m/m in May and April respectively. As lockdowns were relaxed, regulators vowed to assist local governments in delivering projects on time in response to homebuyers' protests while the risk of debt defaults by developers has shown signs of improvement. Nevertheless, several major cities such as Shanghai is still experiencing higher new Covid-19 cases which will dampen the outlook for China in the second half this year.

Korean won – The won depreciated 1.08% to 1,326.08. The won reached a 13- year low against the dollar on Friday as it exceeded the 1,320-won mark.

Australian dollar – The Aussie dollar climbed 0.64% to 0.679. Interest rates could rise by as much as 75bps next month in view of a lower unemployment rate of 3.5%.

Commodities Highlights

Crude oil – Oil prices were mixed where Brent edged up 2.08% to US$101.16 per barrel but WTI dropped 0.54% to US$95.78 per barrel. The downward trend was largely due to worries earlier in the week that a looming recession would reduce demand, with both benchmarks experiencing their biggest weekly percentage fall in almost a month. Brent dropped 5.5% in its three week decline, while WTI shed 6.9% in its two-week decline.

Gold – The gold price declined 0.10% to US$1.708/oz, reflecting investors’ continued flight to the dollar safe haven.

Malaysia Highlights

Malaysian ringgit – The ringgit was on the downside again as it lost 0.11% to 4.449. The MoF has called for the government to implement cost-saving measures to finance the additional subsidy expenditure.

KLSE – The FBM KLCI weakened by 0.11% to 1,418. Detailed transactions showed that local institutions were net buyers of RM36mil. Local retailers and foreign investors were net sellers of RM18.4mil and RM17.6mil respectively.

Fixed Income – MGS 3Y up by 4.0bps to 3.500%, 5Y up by 2.0bps to 3.760%, 7Y remained at 4.000% and 10Y up by 3.0bps to 4.080%.

Rates – The IRS yield for the (3Y) was -1.5bps to 3.420%, (5Y) -3.0bps to 3.545%, (7Y) -5.0bps to 3.640%, and (10Y) +1.0bps to at 3.760%

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.450 and 4.470 while our resistance is pinned at 4.560 and 4.610.

Source: AmInvest Research - 18 Jul 2022