The US

The Dollar index gained 0.06% to 101.40. The Federal Open Market Committee (FOMC) opted for a 25bps rate hike, pushing the Federal Funds Rate (FFR) to 5.00 – 5.25% target range. This is in line with what was guided by the FOMC’s Summary of Economic Projections, where the median FFR will be at 5.1% in 2023. Furthermore, Fed Chair Jerome Powell did say during the Press Conference that it is inappropriate to cut rates at the moment as inflation did not slow down rapidly.

US Equities & Sovereign Bonds

Wall Street closed lower as the Dow Jones down by 0.86% to 33,128, S&P500 down by 0.72% to 4,061, and Nasdaq down by 0.49% to 11,966. The UST10Y benchmark yield added 4 bps to 3.379% and the UST2Y down 1 bps to 3.790%, narrowing the inverted differential to 41 bps.

Eurozone

The Euro was down 0.45% to 1.101. The European Central Bank has raised its benchmark interest rate by 25 basis points in response to a surge in consumer prices, which has led to inflation figures showing a headline rate increase to 7% in April 2023. Additionally, the central bank stated that the inflation outlook continues to be too high for too long.

The UK

The British Pound climbed 0.08% to 1.257. The S&P Global/CIPS UK Services PMI for April 2023 was revised higher to 55.9, indicating the biggest growth in the services sector in a year, driven by stronger consumer spending, especially in the travel, tourism, and leisure sub-sectors.

Japan

The Japanese Yen gained 0.31% to 134.29. The International Monetary Fund (IMF) has warned of uncertainty around the direction of Japan's monetary policy and its possible impact on global financial markets. The IMF's Asia and Pacific Department Director also pointed out risks to Asia's economic outlook, including weakening exports to advanced economies, slowing productivity in China, and a fragmentation of global trade.

China

The Yuan strengthened 0.10% to 6.911. The Caixin China General Manufacturing PMI unexpectedly fell to 49.5 in April 2023, marking the first contraction in factory activity since January 2023. The decline was attributed to an ongoing property downturn and fears of a global slowdown. However, sentiment strengthened due to new product releases, supportive state policies, and investment in new equipment.

South Korea

The Won gained 1.16% to 1,323. South Korea's top economic policymakers viewed the outcome of the FOMC’s decision as positive for domestic financial markets, according to a statement following their review. However, they agreed to remain cautious against any increase in market volatility, given the widening interest rate gap with the US, and committed to stepping up vigilance against market disturbances or herd-like behaviours.

Australia

The Aussie gained 0.33% to 0.669. Australia's trade surplus reached a nine-month high of AUD15.27 billion in March 2023, driven by a recovery in commodity exports. Exports rose 4% m/m in March, with iron ore and coal shipments rising around 20% each, and LNG exports increased 7%. The rebound came after commodity exports declined for two straight months due to weaker demand from China and Japan but improving economic conditions in China may have spurred increased demand for commodities over the past month.

Crude Oil

Oil prices were mixed, reflecting market pessimism on the global front as both FOMC and the ECB made another interest rates hike to cool down inflation. Brent was up by 0.24% to US$73 per barrel while WTI was down by 0.06% to US$69 per barrel.

Gold

Gold Gained 0.55% to US$2,050/oz Pessimism Outlook Increases.

Malaysia Highlights

The Ringgit remained at 4.455. On Wednesday, Bank Negara Malaysia (BNM) hiked the Overnight Policy Rate (OPR) by 25 bps to 3.00%. This is the fifth rate hike since the central bank initiated its post Covid19 pandemic monetary policy normalisation, and the first rate hike made this year. Now that our full-year expectation of the OPR at 3.00% has been realised, there is a case now that the monetary policy normalisation in Malaysia may have ended.

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 FBM KLCI remained at 1,426. Detailed transactions showed that the local institutions and local retailers were net buyers with RM2.5 million and RM25.7 million. Foreign investors were net sellers with RM49.2.

Source: AmInvest Research - 5 May 2023