• The IMF revises down global GDP growth

Global Highlights

Dollar Index – The dollar gained 0.66% to 107.189, rallying prior the FOMC meeting conclusion. The Consumer Confidence Index published by the Conference Board fell 2.7 points this month to 95.7, its lowest level since February 2021 and its third monthly drop due to ongoing concerns about higher inflation and rising interest rates, which could reduce spending and indicating slow economic growth. The FOMC decision will be announced later tomorrow at 2am (Malaysia time), where we expect a 75bps rate hike.

US equities & sovereign bonds – Wall Street was in the red where Dow Jones was down 0.71% to 31,762, S&P 500 down 1.15% to 3,921 and the tech heavyweight Nasdaq down 1.87% to 11,563. The UST10Y benchmark yield continued to climb to 2.807%, while the UST2Y was at 3.509%, where the differential between these securities were –24.60bps.

Euro – The euro slid 1.01% to 1.012. The EU approved a weakened emergency plan to reduce its gas use by 15% from August 2022 to March 2023 as the bloc prepares for future Russian supply cuts in view of Gazprom’s cutting its flow through the Nord Stream 1 pipeline to Germany to 20% of capacity. However, after several governments objected to the EU's first proposal to apply it to every country, countries agreed to exempt a number of nations and industries from the mandatory cut.

British pound – The pound gained by 0.12% to 1.203. The IMF revised down the UK’s growth forecast this year by 0.5% to 3.2% for 2022, and by 0.7% to 0.5% for 2023. The main reason for the revision was high inflation in the UK that is worsening the cost of living situation, and the high interest rate environment.

Japanese yen – The yen weakened 0.16% to 136.910. Government investments on Kioxia Holdings and Western Digital Corp totalling 92.9 billion yen (US$680 million) are being made in an effort to increase manufacturing and guarantee a steady supply of memory chips in Japan. This is to address supply chain disruptions that are scrambling motor vehicles production in Japan.

Chinese yuan – The yuan down 0.19% to 6.764. China’s surge in Covid-19 infections is posing threats on the operations of industry giants, particularly in the southern manufacturing hub of Shenzhen, home to some tech giants including BYD and Huawei.

Korean won – The won gained 0.40% to 1,308.05. The South Korean economy experienced a growth of 0.7% in the second quarter, attributed by strong consumption which offsets poor exports.

Australian dollar – The Australian dollar lost 0.23% to 0.694. Due to a new coronavirus sub-variant-driven outbreak, hospital admissions for Covid-19 in Australia have reached 5,600 patients, a new high for the second day in a row. The daily death toll has also increased to 100, its second-highest level.

Commodities Highlights

Crude oil – Brent was down by 0.71% to $104.40 per barrel and WTI also down by 1.78% to $94.98 per barrel. The past seven days have shown that this commodity has been on a downward trend. The downward pressure was mainly due to weaker consumer confidence, dropping to nearly a 1-1/2 year low in July and the US government’s plan to sell an additional 20 million barrels from oil reserves.

Gold – The gold price was down 0.14% to US$1,717/oz, extending its bearish outlook as investors continued to flee into the US dollar in the anticipation of a 75bps rate hike to be made by the Fed later tomorrow.

Malaysia Highlights

Malaysian ringgit – The ringgit was on the downside as it lost 0.12% to 4.458 due to a stronger dollar prior to the FOMC meeting this week. MITI is maintaining the domestic direct investment (DDI) target of RM100.8bil, the same target as 2021. The first quarter this year recorded a total of RM15bill of DDI, where the main beneficiaries were real estate, utilities, tourism and E&E. The government has decided to keep the residential water tariff in place for the peninsula and Labuan in light of the rising cost of living.

Fixed Income – The MGS 3y remained at 3.52%, 5y remained at 3.74%, 7y up +1.0bps to 3.95%, and 10y down -1.0bps to 3.97%.

KLSE – The FBM KLCI was down by 0.38% to 1,464. Detailed transactions showed that local institutions were net buyer of RM15.2mil. Local retails and foreign investors were net seller of RM1.2mil and RM14.0mil respectively.

Rates – The IRS yield for the (3Y) was -1.00bps to 3.415%, (5Y) -0.50bps to 3.530%, (7Y) +1.50bps to 3.630%, and (10Y) +3.0bps to at 3.750%

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

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 - 27 Jul 2022