• Global manufacturing activities suggest further slowdown in coming months

Global Highlights

Dollar Index – The dollar continued its rally, gaining by 0.91% to 109.691. The S&P Global US Manufacturing PMI was revised up to 51.5 in August 2022 from 51.3 in July, indicating the slowest growth in factory activity since July 2020. Output declined for the second month in a row, while new orders fell for the third straight month due to sluggish client demand and the impact of inflation and economic uncertainty on customer spending.

US equities & sovereign bonds – Wall Street was mixed, where Dow Jones gained 0.46% to 31,656, S&P 500 up 0.30% to 3,967 and the tech heavyweight Nasdaq down 0.26% to 11,785. The UST10Y benchmark yield was at 3.253%, while the UST2Y was at 3.499%, bringing the differential between them to - 24.61bps.

Euro – The euro lost 1.07% to 0.995 due to the stronger dollar and pessimism in the economy. The Eurozone unemployment rate fell to a historic low of 6.6% in July 2022, from 6.7% the previous month. The unemployment rate was much higher a year ago, at 7.7%. Among the Eurozone's largest economies, France and Italy had a lower unemployment rate, but Germany saw no change.

British pound – The pound slid 0.66% to 1.155 due to the stronger dollar. The S&P Global/CIPS UK Manufacturing PMI was revised from a preliminary level of 46 to 47.3 in August 2022. However, it still indicated contractionary activity since May 2020, namely in the consumer, intermediate, and investment goods sectors.

Japanese yen – The yen weakened by 0.90% to 140.210 amid a widening policy divergence with the US as the Federal Reserve signalled its determination to combat inflation with higher interest rates.

Chinese yuan – The yuan shed 0.24% to 6.907. The Caixin China General Manufacturing PMI dropped from 50.4 in July to 49.5 in August 2022, signalling the industry's first downturn since May. The most recent print showed the effects of widespread Covid lockdowns and power outages.

Korean won – The won declined by 1.18% to 1,354.47 due to the stronger dollar. South Korea reported a trade deficit of US$9.47bil in August 2022, down from a surplus of US$1.58bil in the same month a year earlier. It was the highest deficit at least since 1966 and the fifth month in a row that the trade balance was negative, according to preliminary data, as imports increased considerably more quickly than exports amid rising global energy costs.

Australian dollar – The Aussie dollar slipped 0.79% to 0.679. Australian property values experienced their greatest monthly loss in over four decades in August. Major cities had a decline of 1.6%. The RBA monetary policy is scheduled to be announced next week. We and the consensus are expecting the central bank to make another interest rate hike.

Commodities Highlights

Crude oil – Brent lost 4.28% to US$92.36 per barrel, and WTI was down 3.28% to US$86.61/barrel. Concerns on supply continue as G7 members are discussing to put a price cap on Russian oil imports and the possibility of blocking the shipment of Russian oil.

Gold – Gold fell 0.79% to US$1,698/oz, in line with the stronger dollar.

Malaysia Highlights

Malaysian ringgit – The ringgit slid 0.17% to 4.483 due to the stronger dollar and weaker yuan. The Malaysian manufacturing sector PMI slipped from 50.6 in July 2022 to 50.3 in August 2022, suggesting a further slowdown in the sector. The main reason for the slowdown was the delay in receiving input materials, and lack of workers which forced manufacturers to scale down output.

KLSE – The FBM KLCI tumbled 1.33% to 1,492. Detailed transactions showed that local institutions and local retailers were net buyers of RM79.1mil. Foreign investors were net sellers of RM90.1mil.

Fixed income – The 3-year remained at 3.330%, 5-year +2.0bps to 3.750%, 7- year +4.5bps to 3.930%, and 10-year +2.0bps to 4.010%.

Rates – The IRS yield for the (3Y) was up 3.50bps to 3.585%, (5Y) +6.75bps to 3.738%, (7Y) +7.40bps to 3.834%, and (10Y) +4.50bps to 3.980%

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.460 and 4.465 while our resistance is pinned at 4.500 and 4.550.

Source: AmInvest Research - 2 Sept 2022