• US consumer inflation expectations drop.

Global Highlights

Dollar Index – The dollar weakened 0.17% to 106.435. US consumer inflation expectations for the upcoming year dropped from a record high of 6.8% in June to 6.2% in July, the lowest level in five months. The decline was due to expectations for gas price to drop by 4.2 percentage points to 1.5%, and food price to decline by 2.5 percentage points to 1.5%.

US equities & sovereign bonds – Wall Street was mixed where Dow Jones gained 0.09 to 32,833, S&P 500 dropped 0.12% to 4,140 and the tech heavyweight Nasdaq down 0.10% to 12,644. The UST10Y benchmark yield was at 2.757%, while the UST2Y was at 3.205%, meaning the differential of 10Y/2Y US Treasury is -44.81bps.

Euro – The euro gained 0.14% to 1.020. The pan-European Stoxx 600 index increased by 0.8%, stabilising after losing two weeks' worth of gains on Friday.

British pound – The pound added by 0.07% to 1.208. A survey showed that the UK economy is likely to decline for the first time since the Covid-19 pandemic as a result of the high inflation and high interest rate environment that have worsened the cost-of-living situation and doing businesses in the UK. The second GDP preliminary reading will be published this Friday, where consensus is expecting the economy to shrink by 0.2% q/q.

Japanese yen – The yen firmed by 0.04% to 134.95, despite Japan’s current account sinking into a deficit due to surging exports from the high energy and raw material prices.

Chinese yuan – The yuan climbed 0.16% to 6.751, as China’s exports grew by 18.0% y/y in July, beating consensus expectation of 14.1% despite the less stringent zero-Covid policy that was in place. The high number showed that the economy is rebounding after the authorities made some changes regarding the containment measures.

Korean won – The won depreciated 0.62% to 1,306.34. To improve public finance, South Korea intends to sell state-owned idle and abandoned properties over the next five years stating that it aimed to push for the sale of assets valued at 16 trillion won (US$12.3 billion). The earnings will be utilised to support the state coffers.

Australian dollar – The Aussie dollar rose by 1.11% to 0.699. The RBA reported that low-income households in Australia will be the most affected by inflation, which is currently at the highest at 6.1%.

Commodities Highlights

Crude oil – Oil prices gained where Brent was up 1.82% to US$96.65 per barrel and WTI up 1.97% higher at US$90.76 per barrel, fuelled by the positive economic data from the U.S., allowing oil prices to rebound from multi-month lows reached last week.

Gold – The gold price was up 0.76% to US$1,789/oz, rebounding to the same level it was back in early July 2022. The recent gains were also in line with the weakness in the dollar. The market now is waiting for the US inflation report which will be published on Wednesday.

Malaysia Highlights

Malaysian ringgit – The ringgit was on the downside again as it edged down 0.18% to 4.459, despite a weaker dollar and stronger yuan. The finance minister said that the targeted subsidies will only be introduced when the high global inflation situation is under control. Currently, the government is spending up to RM80bil on subsidies including petrol, electricity and cash transfer programmes.

KLSE – The FBM KLCI lost 0.37% to 1,496. Detailed transactions showed that local institutions were net sellers of RM35.9 mil. Local retailers and foreign investors were net buyers of RM38.3 mil and RM0.3 mil respectively.

Fixed income – The MGS for 3-year was up 3.0bps to 3.515%, 5-year up 2.5bps to 3.815%, 7-year up 5.5bps to 3.965%, and 10-year up 3.975%.

Rates – The IRS yield for (3Y) was +4.00bps to 3.495%, (5Y) +4.50bps to 3.640%, (7Y) +5.00bps to 3.740%, and (10Y) +7.00bps to at 3.850%

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.440 and 4.450 while our resistance is pinned at 4.500 and 4.510.

Source: AmInvest Research - 9 Aug 2022