• PMI in most countries below contraction level.

Global Highlights

Dollar Index – The dollar lost by 1.17% to 104.706, as market reassessed their position after Fed Chair Powell commented that the Fed is ready to slow down the pace of interest rates hike, as soon as the upcoming meeting on 13-14 December.  

We are still maintaining our Fed funds rate projection of 50bps rate hike in December and another 25bps in January 2023, which translates to 4.50% - 4.75% projections.  

And now supporting our views is the manufacturing PMI data in the US that fell from 50.2 in Oct’22 to 49.0 in Nov’22. This will be the first contraction since May’20. Slower new orders and supplier deliveries were cited as the reason for the contraction, and some businesses are also planning to stop hiring more workers in the future.

US equities & sovereign bonds – Wall Street was mixed as the Dow Jones down 0.56% to 34,395, S&P500 up 3.09% to 4,080 and the Nasdaq up 4.41% to 11,468.  

Both UST10Y and UST2Y were down after Fed Chair’s comment on monetary policy yesterday. The benchmark UST10Y yield down 10.06bps to 3.505% and the UST2Y down 16.30bps to 4.310%, narrowing the inverted differential between the two to -80.54bps.

Euro – The euro gained by 1.10% to 1.052 due to the weaker dollar. On the macro front, the unemployment rate in the Euro zone fell from 6.6% in Sep’22 to 6.5% in Oct’22. But the unemployment rate continued its downward trend throughout the year. We as well as market are expecting some softening in hiring activities entering 2023.  

The manufacturing PMI (final estimate) for Nov’22 stood at 47.1 (Earlier estimate: 47.3). This will be the fifth month that the manufacturing PMI is under the contraction level due to lower new orders.

British pound – The pound gained by 1.57% to 1.225 due to the weaker dollar. Despite the gain, the manufacturing PMI in November was 46.2, recoding four months of contraction. Survey showed that manufacturing production, exports and volumes of new work continued to decline. Sentiment among manufacturers also deteriorated to the weakest level in 31 months.

Japanese yen – The yen gained by 1.98% to 135.33. BOJ Governor Kuroda Speech yesterday insisted that there will be no changes on the monetary policy before he steps down in Apr’22.

Chinese yuan – The yuan gained by 0.55% to 7.053, as China’s manufacturing slightly improved from 49.2 in Oct’22 to 49.4 in Nov’22. The latest reading was also above market expectation of 48.9. Still, the index is still under the contraction level since Aug’22.

The fall was reflecting a slower factory activity as Covid-19 cases increased by around 40k recently and China’s authority containment measure. Some firms were forced to cut back business activity and laying off workers.

Korean won – The won gained by 1.42% to 1,299.60. South Korea’s economy expanded by 3.1% y/y in the 3Q22 (2Q22: 2.9% y/y). On a quarter-to-quarter basis, the economy expanded by 0.3% q/q (2Q22: 0.7% q/q) which is the slowest pace so far this year. The slower growth was reflecting to the high inflation and high interest rates environment that was already affecting spending.

Australian dollar – The Aussie dollar gained by 0.34% to 0.681. The manufacturing PMI in Nov’22 was 44.7 versus 49.6 in Oct’22. It has been on a softening trend since Apr’22.

Commodities Highlights

Crude oil – The EU governments are ready to put a price cap on Russian crude oil at US$60 per barrel, and the agreement should be finalised before the Monday deadline. Market reacted to this development due to the possibility of oil shortage. The WTI up by 0.83% to US$81.22 and Brent up by 1.70% to US$86.88 per barrel.

Gold – Gold gained by 1.96% to US$1,803/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit was trading between 4.4018 and 4.4465 and gained by 1.41% to 4.446 by end of the day, riding on positive sentiment.  

Despite the ringgit strengthening, the manufacturing PMI declined from 48.7 in Oct'22 to 47.9 in Nov'22. It has been in the contraction mode since Sep’22. Drag came from waning demand as order books were scaled back and production lost growth momentum. Input costs and selling price inflation were softer than earlier in the year.  

However, firms are optimistic on the future outlook and expecting demand conditions to normalise over the coming year. But the degree of confidence did weaken from October to a five-month low due to concern on the long-term effect of the current economic conditions.

KLSE – The KLCI closed higher by 0.80% to 1,489. Detailed transaction showed that local institution and foreign investors were net buyer of RM50.7mn and RM77.7mn. Local retailers were net seller of RM128.3mn.

Fixed Income – the MGS for 10y down by -8.0bps to 3.730%, 5y down -5.1bps to 3.887%, 7y down -6.0bps to 3.968%, and 10y down -4.7bps to 4.063%.

Rates – The IRS yield for the 3-year down -8.00bps to 3.770%, 5-year down 6.00bps to 3.830%, 7-year down -4.70bps to 3.950%, and 10-year down - 8.00bps to 4.050%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.410 and 4.420 while our resistance is pinned at 4.490 and 4.500.

Source: AmInvest Research - 2 Dec 2022