The US

The Dollar index fell 0.70% to 104.57 following the labour market data released on Friday. According to a report, the US economy added 311k jobs in February 2023, after a 504k in January 2023 (cons.: 205k). However, the slower wage growth and higher-than-expected unemployment rate coupled with the collapse of Silicon Valley Bank (SVB) saw lower probability of a 50 bps rate hike in March 2023 meeting. The average hourly earnings for all private workers grew 0.2% m/m compared to 0.3% m/m in the previous months and slower than market forecast of 0.3% m/m. Unemployment rate rose to 3.6% from a 50-year low of 3.4% seen in the previous month (cons.: 3.4%).

This week, all eyes will focus on US February’s inflation rate data, which the market is expecting to ease further to 6.0% y/y after a 6.4% y/y in the prior month.

US Equities & Sovereign Bonds

Wall Street closed in the red as the collapse SVB triggered flight-to-quality into US Treasuries. The Dow Jones fell 1.07% to 31,910, S&P500 fell 1.45% to 3,862 and Nasdaq also dropped 1.76% to 11,139.

The UST10Y benchmark yield dropped by 20 bps to 3.699%, the lowest level in a month, while the UST2Y added fell 28 bps to 4.586%, narrowing the inverted differential to 89 bps.

Eurozone

As the Dollar fell, the Euro was bullish for the second consecutive days as it rose 0.59% to 1.064. Inflation rate in Germany in February 2023 stood at 8.7% y/y, the same level as the preliminary estimates and January’s reading. This week, we will see the ECB officials to meet up for its policy decision where the rate hike pace has been pre-determined during the previous January meeting at a 50 bps. This would bring the main refinancing rate to 3.50%.

The UK

Similarly, the British pound climbed 0.88% to 1.203 as monthly GDP data indicated that the UK’s economy is on stronger footing. Report showed that in January 2023, the economy expanded 0.3% m/m, rebounding from a 0.5% m/m contraction in the prior month, and beating market forecast of a mere 0.1% growth. It was driven largely by services, offsetting the contraction in manufacturing and construction.

Japan

The Japanese Yen strengthened by 0.82% to 135.03, extending bullish trend from the previous session. BoJ Governor Haruhiko Kuroda ended his final meeting by keeping the accommodative policy unchanged. The central bank left the negative interest rate and yield cap on government debt the same. The decision came after the parliament approved Kazuo Ueda as Kuroda’s successor in holding BoJ’s helm.

China

The Yuan strengthened 0.69% to 6.917. Outstanding yuan loans in China grew 11.6% y/y in February 2023, faster than 11.3% y/y in January and beating market expectations of 11.4%. This is the fastest pace since early 2022.

South Korea

The Won weakened 0.20% to 1,325. South Korea’s current account recorded a deficit of $4.52 billion in January 2023, compared to a current account surplus of $2.24 billion in the same month of the previous year.

Australia

The Aussie dollar fell 0.15% to 0.658. The divergence of stance between the US Fed and the RBA has pushed the currency to its lowest level since November 2022.

Crude Oil

Oil prices traded higher as US labour market data may start showing initial signs of rate hike impacts. Brent gained 1.46% to US$82 per barrel while WTI rose 1.27% to US$76 per barrel.

Gold

Gold Surged by 2.03% to US$1,868/oz as the Fallout in SVB Drove Investors to Bid for Safe-haven.

Malaysia Highlights

The Ringgit weakened slightly by 0.03% to 4.520 and traded within 4.516 and 4.525 range. According to the Malaysian Palm Oil Association, the global palm oil market will see a tighter condition as floods and the expansion of older tress constrain productions. This may lead to higher global food prices, amidst elevated interest rates to rein down the inflation.

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 fell 1.13% to 1,433. Detailed transactions showed that the local institutions and retailers were the net buyer with RM105.9 million and RM34.7 million, respectively. Foreign investors, meanwhile, were the net sellers with RM140.6 million outflow.

Fixed Income

Local bond market saw keen buying interests as the benchmark MGS yield 3-year -5.0bps to 3.470%, 5-year -7.0bps to 3.590%, 7-year -7.0bps to 3.840%, and 10- year -7.0bps to 3.950%.

Source: AmInvest Research - 13 Mar 2023