The US

The dollar index rose 0.30% to its near six-weeks high to 104.18 as the S&P Global’s flash Composite PMI for the US unexpectedly improved to 50.2 in February 2023, up from 46.8 in the prior month and beating market expectation of 47.5. Sector-wise, manufacturing PMI improved slightly to 47.8 but remained in the contractionary zone while services PMI rose to 50.5. The better-than-expected reading could be a sign that the US economy continued to be on a firm footing despite a series of rate hike made by the US Fed.

US Equities & Sovereign Bonds

Wall Street closed in the red as the Dow Jones sank 2.06% to 33,130, S&P500 lost 2.00% to 3,997 while Nasdaq dipped 2.50% to 11,492. The UST10Y benchmark yield climbed 14 bps to 3.953% while the UST2Y climbed 10 bps to 4.723%, narrowing the inverted differential to 77 bps.

Eurozone

The Euro fell 0.36% to 1.065. The S&P Eurozone Composite PMI increased to 52.3 in February 2023, up from 50.3 in the previous month and easily beating market consensus of 50.6. This is the fastest expansion of business activity since May 2022 as service sector growth accelerated. This suggests that the region’s economy remained resilient and builds the case for the ECB to raise interest rates further to fight inflation. On another note, sentiments in the Germany advanced as the ZEW Indicator rose further to +28.1 in February 2023, the highest level in one year (cons.: +22.0).

The UK

The UK Sterling rose 0.59% to 1.211. It was the same narrative in the UK as the S&P Global UK Composite PMI up ticked to 53.0, an indication of return to growth level in February 2023, higher than 48.5 in January 2023 (cons.: 49), driven by healthy expansion in services sector and slower contraction in the manufacturing sector.

Japan

The Yen depreciated 0.57% and almost hitting its two-months low at 135.01. Preliminary report showed that the Jibun Bank Composite PMI was unchanged at 50.7 as the services sector posted faster expansion activity while manufacturers noted sharper decline in production.

China

The Yuan weakened 0.35% to 6.880. The PBoC on Monday left its lending rates unchanged for the sixth straight months, in line with market expectations. The one year loan prime rate (LPR), a reference for corporate and household loans, was maintained at 3.65% while the five-year LPR, a reference for mortgage, was kept at 4.30%. This is after the central bank injected more liquidity into the financial system following the lifting of Covid-related measures.

South Korea

The Won weakened 0.11% to 1,296. On the data front, the Composite Consumer Sentiment Index was at 90.5 in February of 2023, down by 0.5 points compared to the prior month’s level, dragged by the concerns on current domestic economic conditions, household income and living standard.

Australia

The Aussie Dollar dropped 0.80% to 0.685. According to the latest RBA’s meeting minutes, during the February meeting, a pause was not an option and the board discussed for a 25 bps or 50 bps rate hike. Also, the board agreed that additional rate hikes are likely in the coming months as the pattern of upward surprises on inflation and wages persists.

Crude Oil

Oil prices were volatile and closed lower on the back of persistent concerns on global economic growth due to the readjustment of Fed rate hike expectations, offsetting the China demand hopes. Brent fell 1.21% to US$83 per barrel while WTI dropped 0.24% to US$76 per barrel.

Gold

As the Dollar Strengthened, Gold Eased 0.34% to US$1,835/oz.

Malaysia Highlights

The ringgit depreciated marginally by 0.06% to 4.433. According to the Economy Minister, significant investments related to the digital economy in Malaysia will soon be announced by the government. This is in alignment in accelerating all plans in the national digital economy blueprint.

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.400 and 4.410 while our resistance is pinned at 4.450 and 4.460.

FBM KLCI

The FBM KLCI gained slightly by 0.04% to 1,474. Detailed transactions showed that the foreign investors were the net buyers with RM77.5 million flow, offset by the local institutions and retailers at RM74.2 million and RM3.36 million, respectively.

Source: AmInvest Research - 22 Feb 2023