• US CPI came in softer

Global Highlights

Dollar Index – The dollar closed lower by 2.12% to 108.206, as inflation numbers came in softer.

Beating ours and market expectation of 8.0% y/y, the US October’s headline inflation rate fell to 7.7% y/y from 8.2% y/y in September. This is the slowest growth since January 2022. At the same time, core inflation also grew slower at 6.3% y/y, down from 6.6% (cons.: 6.5% y/y).

We believe the rate hike from December onwards will be more modest. We are looking at 50 bps hike and followed by 25 bps in January 2023. That should see the Fed settle its policy rate 4.50 - 4.75%.

US equities & sovereign bonds – Wall Street gained as the Dow Jones rose 3.70% to 33,715, S&P500 up 5.54% to 3,956, and Nasdaq gained 7.35% to 11,114.

The UST10Y benchmark yield declined by 27.98bps to settle at 3.813%, and the UST2Y down by 24.74bps to 4.332%, bringing the yields differential between UST10 and UST2 to widen to -51.96bps.

Euro – The euro strengthened by 1.98% to 1.021 due to the weaker dollar. An ECB member said that inflation in the Euro Area is likely to peak soon and said that any interest rates hike in the future should be data dependent, given the uncertainty in the global economy.

British pound – The pound gained by 3.15% to 1.172 due to the weaker dollar. The UK’s 3Q GDP preliminary number will be released later today, where we and consensus are expecting a negative growth of -0.5% q/q (2Q22: 0.2%). The last time UK’s economy contracted was back in the 1Q21, declining by -1.2% q/q.

Focus will also be on next Thursday, where the government will unveil their plan to address the weakening economy, where measures including windfall tax on energy companies and tax-free allowance are expected.

Japanese yen – The yen gained by 3.75% to 140.980. On monetary policy, the BOJ governor said that the central bank will maintain its ultra-loose stance and is expecting inflation will cool down to 2.0% next fiscal year.

Currently, Japan’s inflation rate is at 3.0% in September, and has been on an upward trend since January 2022, due to higher commodity prices and weaker yen.

Chinese yuan – The yuan gained by 0.75% to 7.187. Despite the gain, signs of weakening in China’s economy is imminent, as latest credit growth in October only grew by 11.1%. The loan growth has been on a downward trend throughout the Covid-19 pandemic, and latest easing measures made by the government did not increase appetite for businesses to take up more loans.

Korean won – The won fell by 0.96% to 1,377.81. South Korea’s state-run think tank suggested that the BOK should increase the interest rates at a gradual pace, given that the economy is showing signs of slowing down entering 2023. The think also downgraded South Korea’s GDP projection for this year, from 2.8% down to 2.7%.

Australian dollar – The Australian dollar gained by 2.92% to 0.662. An RBA official said that the central bank is coming to a point where it can slow down its tightening cycle, but it can only be done only there is solid evidence to do so. So far, the RBA has raised its interest rates by 275 basis points since May, taking it to 2.85%.

Commodities Highlights

Crude oil – Global oil prices traded higher due to the softer CPI numbers in the US. Brent up by 1.10% to $93.67/barrel, and WTI up by 0.75% to US$86.47/barrel.

Gold – Gold prices gained 2.85% and closed at US$1,755

Malaysia Highlights

Malaysian ringgit – The ringgit was trading between 4.6918 and 4.7127 during the day and weakened by 0.11% at 4.697.

On a macro front, the Malaysia’s 3Q22 GDP will be released later today. We are expecting growth to be at 12.2% (consensus: 11.7%) supported by strong private consumption, exports, FDIs and trading activities.

KLSE – The FBM KLCI up 0.25%, to 1,450. Detailed transactions showed that local institutions and local retails were net seller of RM78.8mil and RM18.6mil. Foreign investors were net buyer of RM97.4mil.

Rates – The IRS yield for the 3-year up 1.00bps to 4.155%, 5-year down 1.50bps to 4.270%, 7-year down 1.50bps to 4.405%, and 10-year down by 1.00bps 4.500%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.710 and 4.720 while our resistance is pinned at 4.735 and 4.745.

Source: AmInvest Research - 11 Nov 2022