The US

The Dollar index climbed slightly by 0.04% to 105.66 after Fed Chair Jerome Powell concluded its second day of testimony to congress. He reiterated that the there is still a need for the Fed to hike interest rate to tame down inflation, while stressing that it will be data dependent to derive to any decision, including the upcoming March meeting. The chairman further added on the need to solve the ongoing US debt ceiling issue.

Recent data which continued to paint a robust economic backdrop is supportive of further rate hikes. The number of job openings in the US fell to 10.8 million in January 2023, down from 11.2 million in the previous month but beating market expectation of 10.5 million. The level remains above the pre-pandemic average of around 7 million job openings.

US Equities & Sovereign Bonds

Wall Street closed mixed with the Dow Jones fell 0.18% to 32,798, while S&P500 rose 0.14% to 3,992 and Nasdaq also rose 0.40% to 11,576.

The UST10Y benchmark yield added 3 bps to 3.991% and the UST2Y added 6 bps to 5.070%, widening the inverted differential to 107 bps.

Eurozone

The Euro edged lower by 0.04% to 1.055. With growth for the Eurozone pegged at 1.8% y/y in 4Q2022, slightly lower than initial estimates of 1.9% y/y, it translated into a full year 2022 growth of 3.5% (2021: 5.3% y/y). For 2023, we are still expecting a contraction of 0.3% y/y as the energy price burden, surging inflation, and impact from monetary policy tightening to translate into difficult growth path.

The UK

On the other hand, the UK Sterling rose 0.13% to 1.185 as the recent cold snap could intensify inflation pressure. The Arctic blast in the UK is bringing in more snow and cold snap into its capital London, which ultimately could put pressure on the national energy system. National Grid Plc was forced to use coal reserve for the first time to maintain sustainable supply of energy. Transportation routes were also affected with certain airports were closed.

Japan

The Japanese Yen weakened 0.15% to 137.36. On the positive note as implied by the Economy Watchers’ Survey, the sentiment in Japan’s services sector improved to 52.0 in February 2023, up from 48.5 in the previous month (cons.: 49.1). It marked the highest reading in eight months, supported by better activities among both households and corporate.

China

The Yuan appreciated 0.10% to 6.959. China’s new foreign minister Qin Gang warned of a conflict with the US if Washington does not “hit the brake” in containing China’s influence and technological advancement, risking further global geopolitical uncertainties after series of sanctions between these two largest’ s economies.

South Korea

The Won depreciated 1.66% to 1,321. The state-run think thank Korea Development Institute (KDI) stated in its monthly report that following the aggressive rate hikes by the BoK and amidst elevated inflation, private spending and construction investment are experiencing sluggish growth.

Australia

The Aussie Dollar gained 0.08% to 0.659. After 10th consecutive rate hike, the RBA governor Philip Lowe indicated that the Board is mulling to pause. But he also noted that it will depend on the incoming data, and it is “likely” that further tightening of policy is needed to fight inflation. With this, Lowe is opening the door for a pause during its upcoming meeting on 4th April 2023. Nonetheless, divergence between guidance from the RBA and the US Fed has tilted the Aussie dollar towards the downside.

Crude Oil

Concerns on aggressive US rate hike could exaggerate pressure on economic growth and oil demand translated into lower oil price. Brent fell 0.76% to US$82 per barrel while WTI fell 1.19% to US$76 per barrel.

Gold

Gold Rebounded Slightly by 0.02% to US$1,813/oz Despite the Hawkish Stance Echoed by Fed Chair.

Malaysia Highlights

The Ringgit weakened significantly by 1.18% to 4.525 and traded within the range of 4.485 and 4.527. On another note, the Malaysian government is aiming to bring in 20% more of approved investments in 2023. This is after as much as RM264.3 billion approved investments posted in 2022, mainly driven by services sector at RM154 billion, followed by RM84.3 billion for manufacturing and RM26.3 billion for primary sector.

Ringgit Outlook for the Week

The support level for USD/MYR is seen at 4.490 and 4.500 while resistance is pinned at 4.550 and 4.560.

FBM KLCI

The FBM KLC lost 0.27% to 1,455. Detailed transactions showed that the local institutions and retailers were the net buyer with RM69.8 million and RM26.2 million, respectively. Foreign investors, meanwhile, were the net sellers with RM96.0 million outflow.

Fixed Income

Local bond market saw yields pushed higher as the benchmark 3-year +4.0 bps to 3.582%, 5-year +4.0 bps to 3.722%, 7-year +6.0 bps to 3,952%, while 10-year +2.0 bps to 4.041%.

Source: AmInvest Research - 9 Mar 2023