• Slower Fed rate hike pace is imminent

Global Highlights

Dollar Index – The dollar tumbled 1.01% to its lowest level since Aug'22 at 106.14 as market players dial down their expectations of 75bps rate hike for December following the release of minutes from the November meeting showed. The US Fed officials deemed that slowing the pace of rate hike will be appropriate as it allows them to assess the impact and progresses the central bank made in inflation targeting effort. With inflation only shows little sign of cooling down and supply and demand imbalances remained, they have also noted that the terminal rate required will be higher than what was previously expected. As such, we maintain our previous projection of 50bps in Dec'22 meeting and another 25bps in Jan'23.  

On the data front, durable goods ordered excluding non-defense capital goods in the US unexpectedly rose 0.5% m/m in Oct'22, after contraction of at 0.8% in the previous month (cons.: 0.4% m/m).

US equities & sovereign bonds – Wall Street traded higher as the Dow Jones up 0.28% to 34,194, S&P500 up 1.36% to 4,004 and the Nasdaq up 0.99% to 11,285.  

The benchmark UST10Y yield down 6.3bps to 3.693% and the UST2Y down 3.7bps to 4.477%, widening the inverted differential between the two to 78.5bps.

Euro – Due to the weaker dollar, the euro surge 0.90% to 1.040. This was also supported by the better than expected PMI. The November reading showed that manufacturing PMI rose to 47.3 from 46.4 in October while services PMI remained at 48.6.

British pound – The pound rose by 1.42% to 1.206. November’s Flash S&P PMI shows that manufacturing and services reading both maintained the same declining reading at 46.2 and 48.8 as October’s, dragged by the weak volume of new work.

Japanese yen – The yen appreciated by 1.15% to 139.60. The Japanese PM Kishida and his cabinet has compiled together a spending plan worth US$207bn which will be funded mostly by debt with the purpose of supporting the economy amidst global slowdown and high inflation.

Chinese yuan – The yuan closed weaker by 0.29% to 7.161, following Chinese authorities’ signals that they have to ease monetary policy, including reserve requirement ratio cut, to boost lending and support the ravaged economy by property crisis and Zero-Covid policy. Expectations are that it will be cut by 25bps or 50bps by year end.  

On another note, protests erupted over workers’ pay dispute at the world’s biggest iPhone factory in Zhengzhou.

Korean won – The won strengthened 0.34% to 1352.21. While manufacturing's sentiment index in November 2022 was 74, up 2 points from the previous month, the non-manufacturing sector's index was 76, down 3 points from the previous month. The composite economic index also dropped to 91.4 from 102.2 in October 2022.

Australian dollar – The Aussie dollar climbed 1.26% to 0.673. On the data front, manufacturing activity remains healthy according to the preliminary S&P PMI report. Headline reading fell to 51.5, marking the lowest level since 2020 but still in the expansionary zone. Meanwhile services sector continues to be the contractionary zone for the second straight month.

Commodities Highlights

Crude oil – The G7 nations, including the whole of EU and Australia are planning to implement price cap on Russian oil that is transported through the sea as a part of the Western allies’ sanctions on Russia. Brent dropped 3.34% to US$85.41 per barrel while WTI lost 3.72% to US$77.94 per barrel.

Gold – Gold gained by 0.54% to US$1750/oz due to the weaker dollar.

Malaysia Highlights

Malaysian ringgit – The ringgit gained by 0.09% to 4.575 and traded within the range of 4.57 and 4.578.  

We expect the MYR to trade between our support level of 4.510 and 4.590 while our resistance is pinned at 4.590 and 4.600.

KLSE – The KLCI closed lower by 0.46% to 1,441. Detailed transaction showed that local institution and local retails were net buyer of RM46.8mil and RM9.7mil. Foreign investors were the net sellers with RM56.5mil.

Fixed Income – The MGS 3y -3.0bps to 3.900%, 5y -10.0bps to 4.190%, 7y - 9.0bps to 4.260%, and 10y -9.0bps to 4.320%.

Rates – The IRS yield for the 3-year -6.0bps to 4.005%, 5-year -7.0bps to 4.115%, 7-year -7.00bps to 4.250%, and 10-year -10.5bps to 4.360%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.510 and 4.590 while our resistance is pinned at 4.590 and 4.600.

Source: AmInvest Research - 24 Nov 2022