• Dollar gained. US inflation to be released later.

Global Highlights

Dollar Index – The dollar gained by 0.31% to 105.131. Focus today will be on the US inflation numbers, where consensus and us are expecting the headline inflation to recede from 7.7% y/y in Oct’22 to 7.3% y/y in Nov’22.  

We are still maintaining our Fed funds rate projection of 50bps rate hike in upcoming meeting this Thursday and another 25bps in Jan’23 with a 50% chance of 50bps rate hike instead.

US equities & sovereign bonds – Wall Street gained as the Dow Jones up 1.58% to 34,005, S&P500 up 1.43% to 3,991 and the Nasdaq up 1.26% to 11,144.  

The benchmark UST10Y yield up 3.30bps to 3.611% and the UST2Y up 3.11bps to 4.375%, narrowing the inverted differential between the two to 76.41bps.

Euro – The euro was down by 0.03% to 1.054 due to the stronger dollar. The European markets retreated on Monday as investors waited for the latest US inflation reading that will be published later today, and the FOMC meeting on Thursday.

British pound – The pound was up by 0.08% to 1.227 riding on the strong GDP data. The GDP for the UK expanded by 0.5% q/q in Oct’22, which is above of consensus expectation of 0.4% and higher than Sept’22 contraction of -0.6% q/q. Main driver for growth was the services sector that grew by 0.6% q/q on the back of wholesale & retail.

Japanese yen – The yen depreciated by 0.81% to 137.670 due to stronger dollar. The PPI in Japan receded from 9.4% y/y in Oct’22 to 9.3% in Nov’22. Even though the PPI is on a downward trend since Sept’22, the producer inflation is still high given high global commodity prices and weaker yen that pushed up prices of imported raw commodities.

Chinese yuan – The yuan weakened by 0.28% to 6.978. China's banks loans extended by CNY1.21tn in Nov’22, following Beijing's latest efforts to boost growth. However, the value came in below market expectations of CNY1.35tn, but higher than the CNY0.62tn issued in Oct’22.

Korean won – The won lost by 0.49% to 1,307.71 due to the stronger dollar. The short-term credit yields in South Korea dropped by 1bps, the first time in 20 months on Monday, suggesting that the borrowing conditions are improving.

Australian dollar – The Aussie dollar weakened by 0.74% to 0.675 due to the stronger US dollar.

Commodities Highlights

Crude oil – Oil prices were up, pushed higher by the recent shutdown of the Keystone pipeline in the US and uncertainty surrounding the G7 price cap on Russian oil exports. Brent up by 2.48% to US$77.99 and WTI up by 3.03% to US$73.17 per barrel.

Gold – Gold down by 0.88% to US$1,781/oz, remained depressed prior to the FOMC meeting this Thursday.

Malaysia Highlights

Malaysian ringgit – The ringgit was trading between 4.4097 and 4.4257 and weakened by 0.30% to 4.418 by end of the day.  

On a macro front, October’s industrial production (IP) came in well below expectations of 8.1% y/y to read at 4.6% y/y. (10.8.% y/y in Sept’22). It is the slowest growth since May’22.  

Poor showings by IP primarily came from the slower growth in manufacturing by 4.2% y/y (10.4%y/y in Sept) and accompanied by the electricity output, shrank by 1.9%y/y (4.1% y/y in Sept’22) — the first negative growth since Aug’21.

Going forward, we expect the fragility in demand to remain underpinned by the ongoing uncertainties. Hence, we expect continued moderations in input buying, stocks and business confidence.  

Our preliminary estimation showed the 4Q22 GDP would hover around 6.1% and 8.1% following a 9.2% average for the first three quarters of 2022 to bring the full year GDP to between 8.5% - 9.0%. Our GDP outlook for 2023 is around 4.5% supported by domestic demand and aided by exports.  

We expect the MYR to trade between our support level of 4.390 and 4.400 while our resistance level is pinned at 4.420 and 4.430.

KLSE – The KLCI closed lower by 0.19% to 1,474. Detailed transaction showed that local institution and local retailers were net buyer of RM37.7mn and RM14.5mn. Foreign investors were net seller of RM52.2mn.

Rates – The IRS yield for the 3-year up 5.00bps to 3.635%, 5-year up 2.00bps to 3.650%, 7-year up 2.00bps to 3.770%, and 10-year up by 4.00bps to 3.870%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.390 and 4.400 while our resistance level is pinned at 4.420 and 4.430.

Source: AmInvest Research - 13 Dec 2022