• RBA raises interest rates by 50bps.

Global Highlights

Dollar Index – The dollar gained 0.75% to 106.24, marking the first gain after retreating for four days. The US recorded 10.7 million job opportunities in June 2022, the fewest in nine months and under the market expectation of 11 million. This is a decline of 605,000 from a month earlier. After reaching a record high in March, job opportunities had declined three straight months. Retail, wholesale, and state and local government education saw the biggest drops in job postings.

US equities & sovereign bonds – Wall Street declined where Dow Jones shed 1.23% to 32,396, S&P 500 down 0.67% to 4,091 and the tech heavyweight Nasdaq slid 0.16% to 12,349. The UST10Y benchmark yield was 2.748%, while the UST2Y was at 3.051%, where the differential between these securities was -30.25 bps.

Euro – The euro lost 0.94% to 1.017 following the dollar’s gain. Europe’s imports of Russian diesel rose 22% in July, highlighting the high dependence of energy supplies on Moscow. The ECB warned on rising spending as the shared euro approved support measures made up 0.9% of its GDP.

British pound – The pound also weakened by 0.65% to 1.217 due to the stronger dollar. The UK's Nationwide House Price Index climbed 11.0 % year over year in July 2022, above June's growth of 10.7% but falling short of market consensus of 11.5%. House prices increased slightly by 0.1% compared to June, marking the 12th consecutive month of growth. This kept the annual price growth in the double digits for the ninth straight month.

Japanese yen – The yen depreciated 1.19% to 133.17. The Nikkei 225 Index fell 1.42 % to 27,595 and the Topix Index dropped 1.77 % to 1,925 on Tuesday, both falling from two-month closing highs. All sectors were in the red due to a stronger yen, mixed corporate earnings, and the risk of a global recession.

Chinese yuan – The yuan gained 0.24% to 6.753. Tuesday saw the Shanghai Composite tumbling 2.26% to 3,186 while the Shenzhen Component plunged 2.37% to 12,120, reaching their lowest points in at least a month. This was due to rising tensions between China and the US before US House Speaker Nancy Pelosi's anticipated trip to Taiwan, which sparked a significant selloff in Asia.

Korean won – The won dipped 0.09% to 1,305.34. Korea’s annual CPI hit an almost 24-year high, up 6.3% in July from 6.0% in June, as expected.

Australian dollar – The Australian dollar dropped 1.47% to 0.692. The RBA raised its cash rates for the fourth consecutive month by 50bps to 1.85%, marking its fastest tightening policy in almost 30 years. The value of new housing loan commitments shrank 4.4% in June 2022, albeit surpassing prepandemic levels with new owner-occupier and new investor loan commitments being 50% and 101% higher respectively.

Commodities Highlights

Crude oil – Brent was up by 0.51% to $100.54 per barrel and WTI also rose 0.56% to US$94.42 per barrel. Investors are waiting for the conclusion of the OPEC+ meeting on Wednesday and are concerned that there would not be an increase in crude supply. Oil prices were down more than 20% from their peak in June due to concerns that a worldwide slowdown could hamper demand, which has gripped commodity markets over the past two months.

Gold – Gold declined 0.66% to US$ 1,760/oz, ending its rally for the past four days due to the stronger dollar, recessionary concerns and US-China tensions.

Malaysia Highlights

Malaysian ringgit – The ringgit depreciated by 0.05% to 4.455. The government estimated RM4 million in additional revenue from the prosperity tax in 2022. The finance minister noted that the federal government debt as of June 2022 amounted to RM1.045 trillion, 63.8% of GDP, with almost 97.5% of outstanding debt being in ringgit while 2.5% is in foreign currencies. Also, the government does not have any planned new taxes such as GST, windfall or inheritance tax for the time being.

Fixed Income – The MGS 3Y remained at 3.500%, 5Y down 0.5 bps to 3.715%, 7Y up 1.5bps to 3.860%, and 10Y remained at 3.890%.

KLSE – The FBM KLCI was down by 0.47% to 1,495 with most losses were seen in technology and energy while REIT was the only gainer.

Rates – The IRS yield for the (3Y) was -1.00bps to 3.395%, (5Y) -3.00bps to 3.500%, (7Y) -1.00bps to 3.590%, and (10Y) down -4.00bps 3.660%

Against major currencies – The ringgit was weaker against the CNY, THB, and VND, but stronger against the EUR, GBP, AUD, JPY, SGD, 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 - 3 Aug 2022