The US

The Dollar index weakened 0.24% to 102.43. The NY Empire State Manufacturing Index dropped sharply to -31.8 in May 2023, from 10.8 in April 2023, contrary to predictions of -3.75, indicating a significant decline in manufacturing business activity in New York State. New orders and shipments plummeted after a considerable increase last month, while delivery times and inventories decreased, and employment and hours worked declined for the fourth straight month.

Elsewhere, more Fed speak by Atlanta’s Raphael Bostic and Richmond’s Thomas Barkin, unveiled a more hawkish stance. Both are non-voting members.

US equities & sovereign bonds

Wall Street closed higher as the Dow Jones was up by 0.14% to 33,349, S&P500 increased by 0.30% to 4,136, and Nasdaq rose 0.66% to 12,365.The UST10Y benchmark yield added 4 bps to 3.502% and the UST2Y was up 2 bps to 4.010%, widening the inverted differential to 51 bps.

Eurozone

The Euro was up 0.23% to 1.087. Industrial production in the Euro Area fell by 4.1% m/m in March 2023, larger than expected, driven by a sharp decline in the production of capital goods, including buildings and equipment. Output also declined for intermediate goods, energy, and non-durable consumer goods. Among Euro Area countries, Ireland experienced the most significant losses, followed by Germany, the Netherlands, France, and Italy. However, Spain's industrial production saw a positive growth of 1.4% m/m.

On monetary policy, policymaker Luis De Guindos said ECB is in final stages of its hiking cycle but another policymaker Peter Kazimir said hikes may continue for longer.

The UK

The British Pound climbed 0.57% to 1.253. There was a hawkish comment from the BOE chief economist Huw Pill who said inflation at risk of second round effects that could bottom around 4 - 5% level. Plus, UK employment data is due today.

Japan

The Japanese Yen weakened 0.31% to 136.12. Producer prices in Japan increased by 5.8% from a year earlier in April 2023, easing from an upwardly revised 7.4% rise in March. This was the fourth consecutive month of a slowdown in producer prices amid signs that the impact of past spikes in raw material costs has faded.

China

The Yuan strengthened 0.11% to 6.952. The People's Bank of China (PBOC) rolled over its medium-term lending facility (MLF) policy loans for the sixth consecutive month and left the interest rate unchanged at 2.75%, while injecting CNY 125 billion into the banking system via a one-year MLF.

South Korea

The Won weakened 0.18% to 1,337. South Korean house prices fell for an 11th consecutive month in April 2023, but the pace of declines slowed to 0.47% from a 0.78% drop in March, according to data from the Korea Real Estate Board. The 11-month decline, which marks the longest in 11 years, was partly due to a correction following a 32-month rally.

Australia

The Aussie gained 0.81% to 0.670. Focus today will be on the RBA’s minutes. The Reserve Bank of Australia unexpectedly increased the cash rate to 3.85% in May, which is the 11th time it has raised rates in the past year. This was done to address concerns about the high inflation rate of 7%.

Crude oil

Oil prices traded higher, where Brent was up by 1.43% to US$75 per barrel and WTI was up by 1.53% to US$71 per barrel.

Gold

Gold was up 0.28% to US$2,016/oz.

Malaysia Highlights

The Ringgit weakened by 0.38% to 4.497. Malaysia is undergoing long-term economic restructuring into digital transformation and green energy transition to maintain economic growth, according to Economic Minister. Malaysia has been relying on oil and gas, commodities, and semiconductors, which risk the country to economic headwinds. The restructuring aims to create value through the digital economy and energy transition, reducing exposure to international agreements and dependence on commodities and natural resources.

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 went down by 0.39% to 1,417. Detailed transactions showed that the local institutions were net buyer with RM67.4 million. Local retailers and foreign investors were net sellers with RM3.8 million and RM63.6 million respectively.

Source: AmInvest Research - 16 May 2023