The US

The dollar index fell slightly by 0.30%% to 102.06 on recessionary concerns, following hawkish remarks by the US Fed officials. Most recently, Fed Vice Chair Lael Brainard stated that the central bank needs to keep the interest rate high and stay on its course even though inflation is starting to show signs of easing. On the data front, building permits fell 1.6% m/m to 1.33 million in December 2022, the weakest level since May 2020, and lower than market forecast of 1.37 million, pressured by high inflation and elevated mortgage rate. Conversely, the initial jobless claims showed a lower reading at 190k, the lowest in four months, indicating a tight labour market still, which is supportive of hawkish remarks.

US Equities & Sovereign Bonds

Wall Street closed in the red across the board as the Dow Jones fell 0.76% to 33,045, S&P500 dropped 0.76% to 3,899, while Nasdaq dipped 0.96% to 10,852 as recessionary concerns resurfaced. The UST10Y benchmark yield added 2.17bps to 3.392% and UST2Y added 4.4bps to 4.126%, widening the inverted differential between the two to 73.5bps.

Eurozone

As the greenback eases, the euro climbs 0.36% to 1.083 following ECB President Christine Lagarde statement, dashing hope for a slowdown in monetary tightening path despite the recent falls in inflation. She stated that the ECB will continue raising its interest rates and maintaining them at a restrictive level to bring down inflation to 2.0% target

The UK

The British pound rose 0.35% to 1.239. The RICS UK Residential Market Survey revealed the housing market would be clouded with higher borrowing costs and economic uncertainties which are likely to dampen market activities. The survey index dipped to -42%, meaning more participants are pessimistic.

Japan

The Japanese yen strengthened 0.36% to 128.43. Japan’s trade deficit narrowed to JPY1.45 trillion in December 2022 from JPY2.03 trillion in the previous month and marked the longest months of trade deficit of about 17 months.

China

The Yuan weakened 0.26% to 6.776 ahead of the week-long Lunar New Year. Newborns in China is expected to fall as concerns rose on shrinking China’s labour workforce. China’s total population also dropped for the first time in six decades by 850k people to 1.41 billion in 2022.

South Korea

The Won Appreciated 0.37% to 1,233.

Australia

The Aussie Dollar depreciated 0.26% to 0.691. Consumer inflation expectation in Australia climbed to 5.6% in January 2023 from 5.2% in December 2022. Despite the uptick, we are seeing moderation in inflation expectation from the peak of 6.7% back in June 2022.

Crude Oil

Oil prices traded higher as the optimism surrounding Chinese imports remain. Brent climbed 1.79% to US$86 per barrel while WTI rose 1.07% to US$80 per barrel.

Gold

Gold Climbed 1.48% to US$1,932/oz.

Malaysia Highlights

The ringgit strengthened further by 0.19% to 4.308, resuming the bullish trend. Meanwhile, in its first meeting of the year, Bank Negara Malaysia (BNM) kept its OPR unchanged at 2.75%, an outcome that surprises the market. The decision came in after the central bank had raised the OPR by 100 bps over the course of four meetings which started back in May 2022. Due to the lag effects nature of monetary policy, the BNM is taking cautious stance in assessing its effects on the economy. The unexpected outcome in monetary policy sent bond yields lower across the curve. We are maintaining our 2023 OPR forecast at 3.00%. We think that another 25bps rate hike may happen in the remaining months of this year on the assumptions of strong private consumption, elevated core inflation, negative real interest rates, and expected improvement in the labour market.

Against Other Currencies

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.280 and 4.290 while our resistance is pinned at 4.350 and 4.360.

KLSE

The KLSE inched higher by 0.05% to 1,496. Detailed transactions showed that the local institutions were the net buyers with RM118.9mil, offset by local retailers and foreign investors net selling flow of RM47.1mil and RM71.8mil.

Fixed Income

The benchmark yield MGS 3Y -17.5bps to 3.320%, 5Y -23.0bps to 3.500%, 7Y - 23.0% 3.500%, and 10Y -24.0bps to 3.710%.

Rates

The IRS yield for the 3-year -19.50bps to 3.345%, 5-year -21.0bps to 3.395%, 7- year -25.0bps to 3.500%, and 10-year -24.5bps to 3.625%.

Source: AmInvest Research - 20 Jan 2023