The US

The dollar index fell 0.18% to 103.22 as market players reassessed its outlook on the direction of the Fed Funds with the 2-year US Treasury yield rising to its highest level since November 2022. According to Bloomberg, certain traders are already calling for Fed Funds Rate to reach a peak of 6.00% given hawkishness seen of late. Consensus estimate is looking at 5.25% as compared to 4.75% earlier this year. On that note, we maintain target of 5.00% - 5.25% to be reached by June 2022 which was published in our 2023 Global Outlook report.

On the data front, the initial jobless claims inched higher to 196k last week compared to nine-month low 183k in the previous week. This suggest that the labour market is still tight amidst tight financing conditions hence explaining the re-pricing of fed funds rate outlook by the market.

US Equities & Sovereign Bonds

Wall Street was bearish across the board as the Dow Jones fell 0.73% to 33,700, S&P500 lost 0.88% to 4,082, while Nasdaq dropped 1.02% to 11,790.

The UST10Y benchmark yield added 4.8bps to 3.658% while the UST2Y added 6.1bps to 4.482%, widening the inverted differentials between the two to 82.4bps.

Eurozone

The Euro gained 0.26% to 1.074, mainly supported by the hawkish ECB. One of the central bank’s officials Joachim Nagel stated that the ECB should act decisively and reiterating his call for more interest rate increases. This was further supported by inflation situation in one of the biggest economies in the continent is still far away from 2.0% target. Germany’s inflation grew faster by 8.7% y/y in January 2023, compared to 8.6% y/y in the prior month but lower than the market expectation of 8.9% y/y.

The UK

The Sterling gained 0.41% to 1.212 ahead of the UK’s 4Q2022GDP data due later today. The market is expecting for a stagnant growth, and it will be a clearer gauge for what the BoE will do for its next policy meeting.

Japan

The Yen weakened 0.14% to 131.59. The Japanese government plans to present the nominees new BoJ’s governor to parliament next week on 14th February 2023. The market is closely watching the nomination for hints on how the BoJ will pave its way out of its ultra-accommodative policy.

China

The Yuan gained slightly by 0.08% to 6.786. Market players are monitoring the tension between the US and China after the former shot down allegedly spy balloon over the Atlantic Ocean earlier.

South Korea

The Won weakened marginally by 0.01% to 1,260. The effects of higher interest rate is weighing on the household borrowing as it posted the sharpest monthly decrease in at least 19 years by 4.6 trillion Won in January compared to 0.3 trillion decline in December 2022.

Australia

The Aussie Dollar climbed 0.16% to 0.694 after the RBA had earlier this week raised its benchmark rate by 25 bps to 3.35%.

Crude Oil

Oil price fell slightly by 0.69% to US$84.5 per barrel as concerns on fed funds rate exceeding 5.00% resurface again as implied by bond yield movement. WTI also declined by 0.52% to US$78 per barrel.

Gold

Gold Price Declined 0.73% to US$1,862/oz.

Malaysia Highlights

The ringgit weakened 0.42% to 4.316 ahead of the 2022 GDP numbers today where we are looking at 8.5%-9.0% growth. While the job market remained impressive with the unemployment rate of 3.6% in December 2022, recent rally in the ringgit was seen as overdone given that the US Fed has not entirely finished with its rate hike.

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.260 and 4.270 while our resistance is pinned at 4.320 and 4.330.

FBM KLCI

The FBM KLCI closed lower by 0.42% to 1,465. Detailed transactions showed that the foreign investors were the net seller with RM40.8 million outflow, offset by the net buying flow from local institutions and retailers at RM25.7 million and RM15.1 million, respectively.

Fixed Income

The benchmark yield MGS 3Y +3.0bps to 3.380%, 5Y +3.0bps to 3.540%, 7Y +5.0bps to 3.720%, and 10Y +1.0bps to 3.820%.

Source: AmInvest Research - 10 Feb 2023