The US

The Dollar index rose 0.48% to 102.15 as investors wait for the Fed meeting. The Federal Open Market Committee (FOMC) is expected to raise the Fed Funds Rate by 25 bps, to a range of 5.00% to 5.25% at its FOMC meeting this week, based on market expectation. This will be the FOMC’s tenth consecutive rate hike. The markets are looking for a signal from Fed Chair Jerome Powell that the FOMC will take a break to assess the impact of previous rate hikes, based on what was guided in the latest minutes.

On the data front, the US core PCE price index rose 4.6% y/y in March 2023, slightly below 4.7% y/y in the prior month but higher than market expectations of 4.5% y/y. Also, manufacturing PMI by Institute for Supply Management (ISM) noted the headline reading improved to 47.1 during April 2023 from three-year low of 46.3 (cons.: 46.8) with slower contraction seen in new orders and output.

US Equities & Sovereign Bonds

Wall Street closed in the red as the Dow Jones fell 0.14% to 34,052, S&P500 shed 0.04% to 4,168, and Nasdaq fell 0.11% to 12,213.

The UST10Y benchmark yield added 15 bps to 3.568% and the UST2Y added 13 bps to 4.141%, narrowing the inverted differential to 57 bps.

Eurozone

The Euro fell 0.39% to 1.098 but remained near the one-year high it reached recently. The European Central Bank (ECB) is expected to raise interest rates for the seventh consecutive time on Thursday. Although, there were no clear indications whether the hike will be either 25 or 50 bps due to sticky inflation and market turmoil. The recent preliminary GDP reading showed that the Eurozone’s growth grew slower than expected at 1.3% y/y (cons.: 1.4% y/y) during the first quarter of 2023. This is compared to 1.8% y/y in 4Q2022.

The UK

The British Pound fell 0.56% to 1.250. Business confidence has increased for the fifth consecutive month, according to a survey by the Institute of Directors. The economic confidence index, which measures the outlook of company directors, on rose to -5 in April from -13 in the previous month. Although the negative value indicates that pessimism still outweighs optimism, it is a far brighter outlook than November 2022, when the index dropped to -64.

Japan

The Japanese Yen weakened 0.88% to 137.50. Japan's manufacturing sector contracted for the tenth consecutive month in April, according to a survey by Jibun Bank, with a manufacturing PMI score of 49.5, up slightly from 49.2 in March but still below the 50-point threshold that separates expansion from contraction. The survey found that the contraction was due to weak economic conditions globally and domestically, which affected demand and client confidence.

China

The Yuan was relatively flat at 6.918 following the surprisingly weak data released over the weekend. China's official NBS Manufacturing PMI fell unexpectedly to a four-month low of 49.2 in April 2023 (March 2023: 51.9) due to weak global demand. Output, new orders, and buying activity all decreased, while export sales fell for the first time since January, and employment dropped for the second straight month. However, business sentiment remained upbeat, despite hitting its lowest level so far this year.

South Korea

The Won weakened 0.06% to 1,340. South Korea's exports fell for the seventh consecutive month in April 2023, shrinking 14.2% y/y to USD49.6 billion. It was the first-time shipments dropped for seven consecutive months since 2019, and the steepest fall in three months due to a persistent slump in the semiconductor sector amid a global economic slowdown.

Australia

The Aussie gained 0.24% to 0.663. Australia's upcoming budget is expected to show a significant improvement in the country's finances. The treasurer, Jim Chalmers, has emphasized the need for restraint and responsibility, with some funds set aside to ease cost-of-living pressures and support renewable projects. However, there are concerns that excessive spending could worsen inflation, given that the Reserve Bank of Australia has recently hiked interest rates to curb rising prices. The budget is due to be revealed next week.

Crude Oil

Oil prices traded lower as investors become more concerned about global economic growth. Brent fell 0.29% to US$79 per barrel while WTI closed 1.46% lower to US$76 per barrel.

Gold

Gold Eased 0.37% to US$1,982/oz Ahead of the Fed Interest Rate Hike Decision This Week.

Malaysia Highlights

On Friday, the Ringgit strengthened slightly by 0.02% to close at 4.462. Bank Negara Malaysia’s OPR decision is scheduled for this Wednesday, where consensus is expecting BNM to maintain the OPR at 2.75%.

Ringgit Outlook for the Week

The support level for USD/MYR is seen at 4.440 and 4.450 while resistance is pinned at 4.460 and 4.470.

FBM KLCI

The bourse’s fell 0.15% to 1,416. Detailed transactions showed that local institutions and retailers were the net buyers with RM35.8 million and RM10.9 million flow, respectively, while being offset by the net selling flow from foreign investors with RM46.7 million.

Fixed Income

The MGS benchmark yield for 3-year and 5-year was flat at 3.325% and 3.440% while 7-year -1.0 bps to 3.640% and 10-year -3.0 bps to 3.710%.

Source: AmInvest Research - 2 May 2023