The US

The Dollar index weakened by 0.14% to 103.12. The personal consumption expenditure price (PCE) index, which is The Federal Reserve's preferred measure of underlying price pressures is expected to remain high in February, which puts officials in a difficult position as they try to balance their commitment to fighting inflation and the potential stress in the banking system. PEC excluding food and fuel, is predicted to rise by 0.4% from the previous month, which is the largest increase since June. Compared to February 2022, the core PCE is projected to increase by 4.7%, while the headline PCE is expected to rise by 5.1%, both more than double the Fed's target.

US Equities & Sovereign Bonds

Wall Street closed lower, where Dow Jones was down by 0.99% to 32,238, S&P500 was down by 0.80% to 3,971 and Nasdaq was down by 0.30% to 11,824. The UST10Y benchmark yield was down by 23 bps to 3.376% and the UST2Y decreased by 40 bps to 3.767%, widening the inverted differential to 17 bps.

Eurozone

The Euro weakened by 0.07% to 1.076. The Composite Purchasing Managers' Index (PMI) rose to a 10-month high of 54.1 in March 2023, indicating overall economic health. Business activity in the Eurozone accelerated as consumers spent more on services, but there was weaker demand for manufactured goods, leading to a downturn in the factory sector, according to recent surveys.

The UK

The British Pound gained by 0.13% to 1.223. New data suggests that the UK economy may be more resilient than previously thought. Retail sales volume increased by 1.2% m/m in February 2023, surpassing consensus expectation of 0.5% m/m, marking the first time sales have risen to pre-pandemic levels since August 2022. Additionally, the S&P Global's UK composite purchasing managers' index showed a slight easing to 52.2 in March, but still above the 50 level, indicating that the majority of businesses reported an expansion.

Japan

The Japanese Yen gained by 1.34% to 130.73. Activity in Japan's service sector increased in March to its strongest level in almost a decade, with the Jibun Bank's purchasing managers index rising to 54.2 due to increased demand from the return of Chinese tourists. The measure has been above 50, indicating expansion, since September. However, the country's manufacturing sector only saw a small increase in its index, rising 0.9 points to 48.6.

China

The Yuan gained by 0.17% to 6.867 due to the weaker US Dollar. A senior Communist Party official in China, Han Wenxiu, has warned that the foundation of China's economic recovery is not strong enough, and there could be possible spillover effects from global economic problems. He also added that the global economy was at risk of stagflation due to many developed countries aggressively tightening their monetary policy, causing problems for banks and financial markets.

South Korea

The Won appreciated by 1.36% to 1,293. Most South Korean developers struggling to pay interest on their loans rose by 25% last year due to the central bank's aggressive policy tightening and a slowing housing market, according to a report by the Bank of Korea. In the third quarter of 2022, 36.1% of listed developers could not fully cover interest expenses with operating profit, compared to 28.9% in the previous year.

Australia

The Aussie dollar was down by 0.36% to 0.665. Australia's four major banks are predicting that the Reserve Bank of Australia (RBA) will continue to raise interest rates, despite market expectations suggesting that the RBA may have reached its peak. The banks are basing their predictions on economic data released to date, while investors have lowered their expectations of future RBA rate moves due to recent financial market turmoil, with some even predicting a future rate cut.

Crude Oil

Oil prices traded lower, where Brent was down by 0.44% to US$75 per barrel and WTI was also down by 0.03% to US$69 per barrel.

Gold

Gold was up by 1.97% to US$1,978/oz, trading higher this year due to uncertainty surrounding the US and the European banking sector.

Malaysia Highlights

The Ringgit closed stronger by 0.95% at 4.428. On macro news, Malaysia’s headline inflation remained at 3.7% y/y in February 2023, which is 0.1% above of the market expectation. On month-on-month basis, headline prices increased by 0.2% m/m, same pace as previous month.

Ringgit Outlook for the Week

The support level for USD/MYR is seen at 4.450 and 4.460 while resistance is pinned at 4.500 and 4.510.

FBM KLCI

The FBM KLCI lost 0.49% to 1,400. Detailed transactions showed that the local institutions were the net seller with RM77.9 million. Local retailers and foreign investors were the net buyer with RM65.2 million and RM12.7 million respectively.

Fixed Income

MGS yield 3-year -2.0 bps to 3.350%, 5-year remained at 3.500%, 7-year -1.0 bps to 3.790%, and 10-year remained at 3.890%.

Source: AmInvest Research - 27 Mar 2023