The US

The dollar index rose 0.59% to 105.21, the highest in seven weeks after the Fed’s preferred data to measure inflation showed a stronger-than-expected growth. The PCE Price Index for January 2023 rose 5.4% y/y, faster than the previous months reading of 5.3%. Excluding the food and energy prices, core PCE accelerated to 4.7% y/y, up from 4.6%. The core PCE was expected to be at 4.3% y/y prior the release.

In addition, both consumer spending and income started 2023 on a strong footing. Personal spending surged 1.8% m/m, the highest level since March 2021, while personal income rose 0.6% m/m, faster than the prior month 0.3% growth. Taking these two data together, it could prompt the Fed to tighten its interest rate higher for a longer period. For now, we maintain our view that the terminal rate will be around 5.25% - 5.50% by 1H2023.

US Equities & Sovereign Bonds

Wall Street closed in the red as the Dow Jones fell 0.59% to 105.21, S&P500 lost 1.05% to 3,970 while Nasdaq dipped 1.69% to 11,395.

The UST10Y benchmark yield climbed 6 bps to 3.943% while the UST2Y climbed 11 bps to 4.814%, widening the inverted differential to 87 bps.

Eurozone

The Euro fell 0.45% to 1.055 as investors flocked to the dollar. On the macro front, Germany's GfK Consumer Indicator improved to -30.5 for March 2023 from -33.8 in February (cons.: -30.4). It marked the highest reading since July 2022, pointing to the fifth straight month of increase in sentiment amid a fall in energy prices and hopes that the country could avoid a recession.

The UK

The UK Sterling dropped 0.57% to 1.194. The Consumer Confidence indicator in the UK rose to -38 in February 2023 from -45 in the prior month (cons.: -43) and the highest reading since April 2022. While improvements were seen across all of its components, challenges for the UK’s economy remain.

Japan

The Yen depreciated 1.32% to 136.48. Amid the surging in prices of imported raw commodities and yen weakness, the inflation rate in Japan rose to 4.3% y/y in January 2023 from 4.0% in the prior month. This was the highest reading since December 1981. Upward price pressures came from all components such as foods, housing, utilities, and transportations to quote a few.

China

The Yuan weakened 0.75% to 6.960. In its fourth quarter monetary policy report, the PBoC is expected to focus on domestic demand while paying attention on inflation after the lifting of Covid-related rules. The central bank also stated that it will focus on consolidating real estate industry in an effort to prop up the sector.

South Korea

The Won depreciated 0.60% to 1,305. The US is likely to impose a limit on the chip production capabilities of Samsung Electronics Co. and SK Hynix Inc, the world’s top memory chip makers, in China, as an effort by the US to curb Beijing’s access to cutting-edge technologies.

Australia

The Aussie Dollar dropped 1.20% to 0.673. Australia's Treasurer Jim Chalmers said that red-hot inflation in the country has likely peaked but remains a big economic challenge. Currently, inflation is running at its highest level in 32-year, with 7.8% print and is only expected to slow to the top of the Reserve Bank of Australia (RBA)'s target range of 2-3% by mid-2025.

Crude Oil

Rising inventories in the US prompted some weaknesses in oil prices but the prospect of lower Russia’s oil exports provided some support. Brent gained 1.16% to US$83 per barrel while WTI rose 1.44% to US$76 per barrel.

Gold

As the dollar index strengthened and the expectation of higher interest rate is gaining tractions, gold prices fell 0.62% to US$1,811/oz.

Malaysia Highlights

The ringgit weakened marginally by 0.03% to 4.435. The re-tabling of Budget 2023 showed that the Budget continued to be expansionary as the total allocation of expenditures were higher 5.1% at RM386 billion compared to the October 2022’s tabling of RM367.3 billion. Dividend expected from Petronas meanwhile rose higher by RM5.0 billion to RM40.0 billion, compared to the previous tabling.

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.390 and 4.400 while our resistance is pinned at 4.450 and 4.460.

FBM KLCI

The FBM KLCI fell 0.06% to 1,457. Detailed transactions showed that the foreign investors were the net buyers with RM18.0 million flow, offset by the local institutions and retailers at RM11.9 million and RM6.1 million, respectively.

Fixed Income

The MGS benchmark yield closed mixed as the 3-year -0.5bps to 3.485%, 5-year +1.0bps to 3.630%, 7-year -2.0bps to 3.790%, while 10-year +1.0bps to 3.940%.

Source: AmInvest Research - 27 Feb 2023