• Eurozone economy grows better than expected in 2Q22

Global Highlights

Dollar Index – The dollar fell 0.42% to 105.90 marking a declining trend for the third straight session. On the data front, personal income in the US advanced 0.6% m/m, beating market expectation of 0.5% m/m, led by private wages and salaries. On another note, in addition to the US$24 billion investment tax credit for chip factories, the US will be providing US$52 billion in government subsidies for US semiconductor manufacturing and research to lure global chipmakers to build plants in the US.

US equities & sovereign bonds – Wall Street ended the week on a positive note as the Dow Jones rallied 0.97% to 32,845, the S&P 500 rose 1.42% to 4,130 while the Nasdaq climbed 1.88% to 12,391. The UST10Y benchmark yield fell 2.7bps to 2.649% while the UST2Y yield was flat at 2.884%, widening the inverted yield differential of 10/2 to 23bps.

Euro – The euro rose 0.23% to 1.022, finding support from stronger-than-expected preliminary 2Q22 GDP figures. The Euro Area economy grew 4.0% y/y, much better than the market forecast of 3.4% with Spain, Italy and France economy expanded healthily by 1.1% m/m, 1.0%, and 0.5%, respectively. Also, the geopolitical tensions worsened when Russia stopped sending gas to Latvia, in addition to countries such as Poland, Bulgaria, Finland, the Netherlands and Denmark, due to a violation of supply conditions which required these countries to set up rouble accounts in a Russian bank. Latvia said it see no major impact due to the gas cuts.

British pound – The pound slipped 0.07% to 1.217. The UK’s consumer credit grew 6.5% y/y in June, faster than the 5.8% rise in May with consumers borrowing £1 billion on credit cards and £0.9 billion through other forms of consumer loans and advances.

Japanese yen – The yen appreciated 0.74% to 133.27. Japan’s production output surged to 8.9% in June m/m, the biggest one-month rise since 2013. Tokyo’s core CPI was up 2.3% in July y/y, overshooting the BoJ’s inflation target for the second month. Retail sales expanded 1.5% in June y/y, lower than expected as the median forecast was a 2.8% gain. Also, the jobless rate stood at 2.6% in June, unchanged from May.

Chinese yuan – The yuan gained slightly by 0.04% to 6.745. China officials dropped their 5.5% growth target as they focus on the zero-Covid policy, indicating they no longer view 5.5%, or even 5%, as achievable for this year. China reiterated its plans of not resorting to flood-like stimulus to help economic recovery and instead will use effective investment.

Korean won – The won was flat at 1,299. The concerns regarding South Korea’s economic growth intensified with semiconductor’s stockpiles grew 79.8% y/y, up from a 53.8% y/y growth in May, while production and shipment had slower growth.

Australian dollar – The Aussie dollar eased 0.06% to 0.699. Australia’s PPI reached a near 14-year high, up 5.6% y/y in the June quarter, following a 4.9% rise in the previous three months, signalling inflation pressure is building up in the Australian economy.

Commodities Highlights

Crude oil – Oil prices were up with WTI surging 2.28% to US$98 per barrel and Brent soared 2.68% to US$110 per barrel as hopes of a boost supply dashed, ahead of the OPEC+ meeting this week.

Gold – Gold rose 0.58% to US$1,765/oz on Friday as markets reduced their expectations for an aggressive Federal Reserve, surging for the third straight session to its highest level in three weeks.

Malaysia Highlights

Malaysian ringgit – The ringgit strengthened 0.05% to 4.451 and traded within the range of 4.453 and 4.475. The finance minister disclosed that Budget 2023 will focus on economic recovery and continuing reforms to improve socioeconomic resilience. Besides, MSME’s financing expanded faster at 6% in 1Q 2022, with MSME contributing 37.4% to the GDP and 47.8% of employment in the workforce last year.

KLSE – The FBM KLCI ended the week marginally higher by 0.07% to finish at 1,492. Detailed transactions showed that both the foreign investors and local institutions were the net buyers with RM18.9mil and RM25.4mil position, respectively, while being offset by the local retailers with RM44.3mil selling flow.

Fixed income – The local bond market saw firmer bids with the 3-year losing 2.0bps to 3.510%, 5-year -2.0bps to 3.720%, 7-year -7.0bps to 3.840%< and 10-year -6.0bps to 3.900%.

Rates – The IRS yield for the (3Y) was -2.5bps to 3.410%, (5Y) -4.5bps to 3.500%, (7Y) -6.0bps to 3.600%, and (10Y) -7.0bps to at 3.690%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.430 and 4.440 while our resistance is pinned at 4.560 and 4.610.

Source: AmInvest Research - 1 Aug 2022