• PMI reading for most economies are softer

Global Highlights

Dollar Index – The dollar lost 0.43% to 105.45, as market re-evaluate their view on the fed funds rate outlook. July’s ISM manufacturing PMI slowed down to 52.8 from 53.0 in June, the lowest reading relative to the past 12 months. New orders continued to contract, and businesses were expressing pessimism on the economy. July’s labour data is due this Friday, where consensus is expecting the unemployment rate to remain at 3.6%.

US equities & sovereign bonds – Wall Street declined where Dow Jones down 0.14% to 32,798, S&P 500 down 0.28% to 4,119 and the tech heavyweight Nasdaq down 0.18% to 12,369. The UST10Y benchmark yield was 2.573%, while the UST2Y was at 2.870 %, where the differential between these securities were -26.69 bps.

Euro – The euro gained 0.41% to 1.026 after dollar weakened. The Eurozone’s unemployment remained at 6.6% in June, where the lowest unemployment rate is in Germany at 2.8% and the highest in Spain at 12.6%. S&P Global’s manufacturing PMI contracted in July to 49.8, down from June’s 52.1, mainly driven by weak demand resulting in high inventory.

British pound – The pound also gained by 0.65% to 1.225 due to the weaker dollar. S&P Global’s UK manufacturing PMI in July shrank to 52.1 from 52.8 in June. Consensus is now expecting the BoE to make a half-point interest rate hike to 1.75% this week. The BoE had also removed the mortgage affordability test, a requirement for borrowers to be able to afford a 3% rise in interest rates before obtaining a home loan.

Japanese yen – The yen depreciated 1.25% to 131.610. The Jibun Manufacturing PMI was at 52.1 in July, down from initial estimate of 52.2 and following a final reading of 52.7 in June. This indicated that the sector experienced its weakest growth in 10 months, as a result of rising energy and labour costs as well as ongoing inflationary pressures.

Chinese yuan – The yuan down 0.36% to 6.769. The Caixin/Markit manufacturing PMI was 50.4 in July, falling short of market forecasts of 51.5 but outperforming official data released over the weekend that showed an unexpected decline in industrial activity in China. On politics, despite warnings from Beijing, House Speaker Nancy Pelosi is expected to arrive in Taiwan as soon as Tuesday.

Korean won – The won depreciated 0.37% to 1,304.11. South Korea’s exports grew by 9.4% y/y in July, slightly below the consensus expectation of a 10% gain. Imports gained 21.8% y/y in July, faster than June’s 19.4%. PMI values for July slid to 49.8 from 51.3 in June, marking the first contraction in nearly two years.

Australian dollar – The Australian gained 0.54% to 0.702. The manufacturing PMI scored 55.7 in July, below June’s 56.2 but still above the expansion threshold. Australia’s home prices slipped at a quicker pace as property prices shed 1.3% in July compared to 0.6% decline in June, amidst rising borrowing costs and cost-of-living crisis.

Commodities Highlights

Crude oil – Brent down by 9.07% to $100.03 per barrel and WTI also down by 4.80% to $93.89 per barrel. For the first time since 2020, WTI and Brent both ended July with a second consecutive monthly decline. As some producing nations struggled to bring wells back online, data indicated that as of June, OPEC+ was still producing roughly 3 million barrels per day short of its output target.

Gold – Gold gained 0.35% to US$ 1,772/oz, reaching its highest level in four weeks. The worsening macroeconomic environment also caused investors to reduce their bets on an overly aggressive Fed.

Malaysia Highlights

Malaysian ringgit – The ringgit depreciated by 0.05 % to 4.453. The S&P Global Malaysia Manufacturing PMI increased to 50.6 in July from 50.4 the previous month, indicating that the industry has expanded three months in a row and experiencing its strongest growth since April. New orders increased at their fastest rate in three months though growth rates were still moderate. On the consumer front, the government has set up a ceiling price for 5kg cooking oil at RM34.70 and will only be enforced in Peninsular Malaysia. Currently, cooking oil is being sold at RM39–RM42 per bottle. This means the new prices translate to a 11%–17% price reduction for consumers.

Fixed Income – The MGS 3Y was down by 1.0bps to 3.500%, 5Y remained at 3.720%, 7Y up +1.0bps to 3.850%, and 10Y down 1.0bps to 3.890%.

KLSE – The FBM KLCI was up by 0.66% to 1,502.

Rates – The IRS yield for the (3Y) was -0.50bps to 3.405%, (5Y) +3.00bps to 3.530%, (7Y) remained at 3.600%, and (10Y) up +1.0bps 3.700%

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.450 and 4.460 while our resistance is pinned at 4.560 and 4.610.

Source: AmInvest Research - 2 Aug 2022