The US

Ahead of the US inflation data, which is due later tonight, the dollar index traded range bound around 103.19 as traders avoided making big moves. The December’s inflation would paint a clearer picture if the entrenched inflation does indeed trending down as expected, making the case for slower rate hike pace by the US Fed. For now, the consensus is looking at 6.5% y/y inflation rate, lower than November’s 7.1% y/y. As it is, divergence between how the market is looking at where the terminal rate vis-à-vis how the US Fed views it remains in place.

US Equities & Sovereign Bonds

Wall Street closed in the green as the Dow Jones climbed 0.8% to 33,973, S&P500 rose 1.3% to 3,970 while the tech heavyweight Nasdaq gained 1.8% to 10,932.

Despite hawkish note by US Fed officials, UST10Y benchmark yield lost 7.96bps to 3.539% while UST2Y lost 3.95bps to 4.247%.

Eurozone

The euro rose 0.03% to 1.073 as the dollar eased. Notwithstanding lower inflation reading recently, more ECB officials are inclined towards higher interest rates. The Finnish counterpart of central bank chief Olli Rehn stated that inflation is still “far too high” hence the ECB needs to raise interest rates significantly. This is after other official Isabel Schnabel who made the same hawkish tone on Tuesday.

The UK

The British pound fell 0.25% to 1.215, but still hovering near its five months high. Equities in London traded higher and almost touching its record high amidst optimism surrounding China reopening. Nonetheless, this seems like a detached reality as the economic prospect in the UK remained repressed by the tighter financial condition and elevated energy prices.

Japan

The yen weakened 0.14% to 132.45. According to a quarterly BoJ survey, the ratio of Japanese households looking at prices to rise by an average of 9.7% in 12- months from current levels, higher than 8.5% expectation in the September’s survey. This means that the inflation expectation in Japan is creeping up, putting pressure on the central bank BoJ to pivot their monetary policy stance anytime soon.

China

The yuan strengthened 0.21% to 6.765, hitting its strongest level in five months as the reopening of economy continued to provide support for the currency. But ahead of Lunar New Year, there is a risk that Covid cases could see another spike soon.

South Korea

The won depreciated 0.13% to 1,246. Recent weakness seen in labour market can be a sign of a recession in the country. On the data front, South Korea’s unemployment rate upticked to 3.3% in Dec’22, much higher compared to 2.9% in the previous month.

Australia

The Aussie dollar dipped 0.33% to 0.689 as inflation is still high in Australia. The newly released monthly CPI indicator surged to 7.3% y/y in Nov’22, faster than 6/9% y/y in Oct’22. The upward pressure comes from housing, foods and transportation.

Crude Oil

Oil prices surged higher as the optimism surrounding better China’s economic prospect supported the global benchmark prices. The Brent surged 3.21% to US$82.67/barrel while WTI soared 3.05% to US$77.41/barrel

Gold

Gold Fell by 0.07% to US$1,876/oz as Market Players Waited for the US Inflation Data.

Malaysia Highlights

The ringgit appreciated 0.02% to 4.374. Malaysia November’s industrial production (IP) grew by 4.8% y/y, which is higher than October’s growth of 4.6% y/y, and beat consensus expectation of 2.9% y/y. On private consumption, growth in the distributive trade sales slowed down from 14.9% y/y in Oct’22 to 13.9% y/y in Nov’22.

Against Other Currencies

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.350 and 4.360 while our resistance is pinned at 4.400 and 4.410.

KLSE

The KLCI closed on firmer note by 0.18% to 1,488. Detailed transaction showed that both local retailers and foreign investors were the net sellers with RM24.93mil and RM73.33mil respectively. Meanwhile, local institutions were the net buyers with RM98.26mil positions.

Fixed Income

The MGS 3-year +1.5bps to 3.535%, 5-year +1.5bps to 3.800%, 7-year unchanged at 3.960%, and 10-year +2.0bps to 3.965%.

Rates

The IRS yield for the 3-year was flat at 3.625%, 5-year +3.5bps to 3.700%, 7-year +3.0bps to 3.830%, and 10-year +6.0bps to 3.990%.

Source: AmInvest Research - 12 Jan 2023