The US

USD strengthened on Friday and closed stronger for the week. Dollar rose 0.61% to close the week at 102.68 amid safe haven demand and weak stock markets as well as slowing inflation, upside in US jobless claims, debt ceiling worries, and banking sector concerns. This week could see drivers from various Fed officials’ comments. Some worries last Friday were Fed governor Bowman saying there could be another rate hike if inflation remains firm.

On the data front, the University of Michigan’s US consumer sentiment unexpectedly dropped to 57.7 during May 2023 from 63.5 in the previous month, prompted by the US debt ceiling issue.

US equities & sovereign bonds

Last Friday’s closing saw the UST yields closing the week higher. The UST10Y rose 7 bps for the day to close at 3.46% or up 1 bps week-on-week and giving up their earlier weekly gains. The UST3Y rose 9 bps to 3.98%, widening the inverted differential with UST10Y to 52 bps.

Wall Street closed lower with Dow Jones fell 0.03% to 33,301, S&P500 fell 0.16% to 4,124, and Nasdaq dipped 0.36% to 12,285.

Eurozone

The EUR fell 0.61% to 1.085 amid firm USD, ignoring the hawkish ECB talk. Last week’s disappointing German industrial production print continued to pressure EUR. However, Spain and France April CPI at 0.6% m/m were both within expectations. Coming week will see prints of eurozone PMIs.

The UK

Similar to the EUR, the GBP was also on the decline against the USD as it dipped 0.42% to 1.246. Sentiment was negatively affected by the BOE’s hike and less dovish signals in the face of inflation pressure. On the data front, the UK’s growth during the 1Q2023 came in line with expectations of 0.2% y/y, slower than 0.6% y/y in the previous quarter, supported by services (0.7% y/y) and construction (4.5% y/y) while being outweighed by productions (-2.6%).

Japan

The Japanese Yen weakened 0.87% to close at 135.70. The focus this week will be on GDP growth data where the market is expecting a marginal 0.1% q/q growth during the first three months of 2023.

China

The Yuan weakened as well by 0.15% to 6.959. More China’s data will be released this week including industrial production, retail sales, and unemployment rate which will guide further if the recovery in China is picking up.

South Korea

The Won weakened 0.62% to 1,334. Data showed that the number of jobs for people in their 40s declined during April 2023 for the 10th straight months amidst deep slump in manufacturing as global economies remained engulfed with uncertainties.

Australia

The Aussie dollar lost 0.84% to 0.6646. Investors will be looking at RBA’s May meeting minutes to draw a clearer picture on its policy rate outlook after it made a surprise 25 bps rate hike.

Crude oil

Oil prices traded in red as global economic growth and financial sector risks took precedent over supply concerns. Brent fell 1.08% to US$74 while WTI dropped 1.17% to US$70 per barrel.

Gold

Gold fell 0.21% to US$2,010/oz amid banking sector and debt ceiling risks, as well as questions over central banks’ direction.

Malaysia Highlights

MYR fell against the firm USD despite stronger-than-expected GDP print especially as the end of tightening cycle is forthcoming domestically as well. It weakened 0.36% to 4.480 and traded within the range of 4.4735 and 4.4805.

Malaysia 1Q2023 GDP was stronger at 5.6% y/y vs 5.1% expected. However, the current account surplus shrunk to RM4.3 billion (4Q2022 RM27.5 billion) amid decline in goods & services as well as primary Income.

Ringgit outlook for the week

The support level for USD/MYR is seen at 4.460 and 4.470 while resistance is pinned at 4.480 and 4.490.

FBM KLCI

The FBM KLCI went down by 0.16% to 1,423. Detailed transactions showed that the local institutions were the net buyers with RM72.3 million flow, offset by net selling positions by local retailers and foreign investors with RM4.6 million and RM67.6 million flow.

Fixed Income

Continued strength in MGS was seen on Friday but mainly centred towards the longer end, aided somewhat by easing global tightening expectations. The benchmark yields for 3-year and 5-year were flat at 3.360% and 3.465%, respectively, but 7-year yield -5.0 bps to 3.600%, and 10-year -5.5 bps to 3.635%.

Source: AmInvest Research - 15 May 2023