The US

The Dollar index fell 0.22% to 104.42 as the market saw a slight calm in banking sector could prompt the Fed to continue raising its key interest rates. A large group of banks injected USD30 billion into First Republic Bank in rescuing the lender caught up in the widening banking sector crisis. Also, Credit Suisse borrowed up to USD54 billion from Swiss National Bank (SNB) to prop up liquidity and investors confidence.

US equities & sovereign bonds

Wall Street saw some recoveries as the Dow Jones rose 1.17% to 32,247, S&P500 rose 1.76% to 3,960 while Nasdaq surged 2.48% to 11,717. The UST10Y benchmark yield rose by 12 bps to 3.577%, and the UST2Y added 27 bps to 4.157%, widening the inverted differential to 58 bps.

Eurozone

The Euro rose 0.31% to 1.061. As expected, the European Central Bank (ECB) raised its key interest rates by 50 bps, which brings the main refinancing rate, deposit rate, and marginal lending rate to 3.50%, 3.00%, and 3.75%, respectively. Amidst banking sector turmoil following the Silicon Valley Bank (SVB)’s collapse, the central bank signalled that it is ready to provide liquidity to banks if needed. With much more needed to do on the inflation front, ECB President Christine Lagarde did not provide any future guidance, but the market is expecting for the central to go slower to prevent the stress in banking sector to escalate further. The ECB revised its inflation projection lower to 5.3% in 2023 and 2.9% in 2024, down from 6.3% in 2023 and 3.4% in 2024 in December’s projection.

The UK

Similarly, the British pound rose 0.43% to 1.211. On Wednesday, the UK’s Finance Minister Jeremy Hunt announced the Spring Budget which contains pledges of tax and spending on labour market, pensions, childcare, defence, and private investment as the government seek to solve UK’s stagnant growth amidst surging inflation.

Japan

The Japanese Yen weakened by 0.24% to 133.74. Japan’s private sector machinery orders, an indicator of business investment, rose 4.5% y/y in January 2023, after a 6.6% y/y drop in the prior month (cons.: -3.5% y/y). It was driven mostly by non-manufacturing orders which came from construction, transportations, and finance & insurance.

China

The Yuan appreciated slightly by 0.12% to 6.898. On the positive note, the average new home prices in China dropped by 1.2% y/y in February 2023, a lesser decline compared to 1.5% y/y drop in the previous month and much lesser than the 7-years low of 1.6% y/y decline in November 2022.

South Korea

The Won depreciated 0.69% to 1,313. During the first bilateral working meeting with Japan after 12 years, both country’s leaders achieved few things. Among them are lifting of Japan’s export ban to South Korea on high tech materials needed to produce semiconductors and displays, restarting security dialogue in view of heightening political threat from North Korea, setting up new economic security meetings, and creating a fund between both countries’ private sector in building “future-oriented” relations.

Australia

The Aussie dollar rose 0.56% to 0.666. The seasonally-adjusted unemployment rate unexpectedly fell further to 3.5% compared to market estimate of 3.6%, down from 3.7% in the previous months as employment posted the first gains after three months of decline. This shows that the Australian labour market is still on better condition despite the series of rate hike executed by the RBA.

Crude oil

Following the meeting between Saudi Arabia and Russia in discussing to enhance market balance, oil prices rose. Brent climbed 1.37% to US$74 per barrel and WTI rose 1.09% to US$68 per barrel.

Gold

Gold rose slightly by 0.05% to US$1,919/oz.

Malaysia Highlights

The Ringgit fell 0.42% to 4.503 and traded within the range of 4.484 and 4.512. According to the Deputy International Trade and Industry Minister, the New Master Industrial Master Plan (NIMP 2030) is being reviewed and it will help create bigger middle-income earner group in the country. The reviewed Plan will address issues such as labour shortages among industry players and small wages to benefit Malaysians as a whole.

Ringgit outlook for the week

The support level for USD/MYR is seen at 4.460 and 4.470 while resistance is pinned at 4.500 and 4.520.

FBM KLCI

The FBM KLCI fell 0.88% to 1,392. Detailed transactions showed that the local institutions were the net buyer with RM110.4 million. Foreign investors and local retailers were the net sellers with RM99.7 million and RM10.70 million outflow, respectively.

Fixed Income

Local bond market saw some selling flows. The benchmark MGS 3-year yield +2.0bps to 3.450%, 5-year +2.0bps to 3.555%, 7-year +1.0bps to 3.820%, and 10- year +1.0bps to 3.920%.

Source: AmInvest Research - 17 Mar 2023