• UK government announces a U-Turn from its tax cut plan

Global Highlights

Dollar Index – The dollar eased 0.33% to 111.75, away from the 20-year high it hit recently after a general improvement of risk appetite in the market, and in parallel with falling UST yields and rising stock markets. On the data front, the ISM Manufacturing PMI fell to 50.9 from 52.8 in August and falling short from the market expectation of 52.2. This is the lowest growth level since 2020. Meanwhile, the S&P Global PMI still showing improvement albeit at moderate pace at 52.0 from51.5 in August 2022.

US equities & sovereign bonds – Wall Street closed in the green, in parallel with easing Treasury yields. The Dow Jones surged 2.66% to 29,491, S&P500 rose 2.59% to 3,678 and Nasdaq soared 2.27% to 10,815.

The UST10Y benchmark yield lost 19.0bps to 3.639%, while the UST2Y lost 16.5bps to 4.113%, widening the inverted differential between the two to 47.5bps.

Euro – Taking cue from the weaker dollar, the euro rose 0.24% to 0.983. The final S&P Global Manufacturing PMI figure was confirmed at 48.4, slightly lower than the initial figure of 48.5 for the month of September and lower than 49.6 in August. It marked the third consecutive months of contraction manufacturing activity, which supports our view that the Euro region’s economy already tipped into recession during the 3Q22.

British pound – The pound surged 1.37% to 1.132 against the weaker dollar following the policy U-turn by the newly-elected PM. The recently announced tax cuts had caused markets turmoil including the tumble in pound and bond market rout which forced Bank of England to spend £63 billion to buy the longdated gilts. Looking at the data, the S&P Global UK Manufacturing PMI posted another month of activity contraction at 48.4 in September from 47.3 in August.

Japanese yen – The yen strengthened 0.13% to 144.55 but had weakened past the psychological level 145 for the first time since 22nd September, when authorities intervened to bolster the yen currency. The finance minister Suzuki stated if the yen slide persists, Japan is ready for “decisive” steps to intervene in the FX market. He also said that as much as ¥2.8 trillion was spent to prop up the currency in September.

Report showed that the sentiment among large manufacturers was lower for 3Q22 as the headline reading fell to 8 from 9 in the prior quarter. It missed the market forecast of 11 and the lowest level since first quarter of 2021 as the sentiment was outweighed by weak yen, high inflationary cost, and China’s Zero-Covid policy.

Chinese yuan – The yuan remained stable at 7.116. The woes over China’s property market recovered after authorities told the biggest state-owned banks to provide financing worth at least US$85 billion to help boost the sector.

Korean won – The won weakened 0.69% to 1,442. Amidst sliding Korean won and US dollar, both countries agreed to implement liquidity facilities to dampen financial instability if worst case scenario arises.

Australian dollar – The Australian dollar surged 1.81% to 0.652 as the risk-on sentiment emerged. The S&P Global Australia Manufacturing PMI posted a lower final figure of 53.5 compared to preliminary of 53.9 and August’s figure of 53.8. In tandem with other countries’ PMI, this is the lowest level since August 2021.

Commodities Highlights

Crude oil – Oil prices spiked up due to increasing speculation that OPEC+ countries and its allies is considering output cut, the first move since the pandemic started in 2020. Brent climbed 1.02% to US$88 per barrel while WTI surged sharply by 5.21% to US$83 per barrel.

Gold – Gold prices soared 2.37% to US$1,700/oz. The relief in gold prices can be attributed to the weakness in dollar for the past recent weeks. But the downside risks remain as global central banks are on their path to hike their interest rates aggressively.

Malaysia Highlights

Malaysian ringgit – The ringgit resumed its weakening trend as it depreciated 0.24% to 4.649 and traded within the range of 4.6512 and 4.6375. Malaysia’s manufacturing purchasing managers' index (PMI) dipped into the recession mode. The reading moved back to under the 50 marks in September, posting 49.1 from 50.3 in August. It turned out to be the lowest reading in 2022.

KLSE – The FBM KLCI rebounded 0.21% to 1,398. Detailed transactions showed that the foreign investors were the net sellers with RM112.4mil, offset by the net buying flow from local institutions and retailers at RM103.1mil and RM9.3mil, respectively.

Fixed income – The local bond market saw a tad weaker bids as the 3-year was +1.5bps to 3.795%, 5-year +1.0bps to 4.010%, 7-year +5.0bps to 4.280%, and 10-year +0.5bps to 4.440%.

Rates – The IRS yield for the 3-year +1.0bps to 3.855%, 5-year +4.5bps to 4.075%, 7-year +1.0bps to 4.170%, and 10-year +1.5bps to 4.355%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.625 and 4.645 while our resistance is pinned at 4.650 and 4.660.

Source: AmInvest Research - 4 Oct 2022