The US

The Dollar index posted late gains, coinciding with rise in UST yields. The DXY rose 0.18% to close at 102.61. The Atlanta Fed's GDPNow forecast for 2Q23 is  lowered to 2.6% from 2.7% in the previous estimate. It is worth noting GDPNow  however, is not the official forecast of Atlanta’s Federal Reserve but rather a  running estimate that considers latest information flow of the economy. However,  the Fed officials’ speech continued to be hawkish with Cleveland’s Loretta Mester  (non-voter) said that current level of Fed Funds rate does not warrant a hold yet.

Retail sales in the US expanded 0.4% m/m during April 2023 after two months of  0.7% m/m decline in both February and March 2023 (cons.: 0.8%).

US equities & sovereign bonds

Tuesday saw more losses in the UST market with yields on shorter to medium  tenors up 5-7 bps while tenors 10Y to 30Y up by smaller 3-4 bps. Losses came  after print of US retail sales rose and ahead of the latest debt ceiling talks. The  UST10Y closed at 3.534% while UST2Y closed at 4.082%, widening the inverted  differential to 55 bps.

US equites fell with Dow Jones was down 1.01% to 33,012, S&P500 fell 0.64% to  4,110, and Nasdaq shed 0.18% to 12,343.

Eurozone

The Euro was up 0.11% to 1.086. The ZEW Economic Sentiment Indicator for the  Euro Area swung back to negative territory at -9.4 during May 2023 from 6.4. This  is worse than market expectations of -1 amidst still elevated inflation the ongoing  tightening monetary policy

The UK

The British Pound lost 0.33% to 1.249. UK’s labour market saw mixed  developments as data showed the number of unemployment benefit claim ticked  up by 46.7k, the largest increase since 2021, and its unemployment rate climbed  to 3.9% during the first quarter of 2023 (cons.: 3.8%). On the other hand, wage  growth remains strong at 5.8% y/y, in line with market expectations.

Japan

The Japanese Yen weakened 0.20% to 136.39. The Japanese government  signalled that it would work in collaboration with the Bank of Japan (BoJ) in spurring  sustainable wage growth to help the country reach a “sustained inflation rate of  2%”.

China

The Yuan depreciated 0.37% to 6.977. China’s recovery post-Covid continued to  fall short from expectations as both the industrial production index and retail sales  only grew by 5.6% y/y and 18.4% y/y, respectively during April 2023 compared to  market forecast of 10.9% y/y and 21.9% y/y. Nevertheless, the April 2023 unemployment rate unexpectedly fell to 5.2% from 5.3%.

South Korea

The Won weakened 0.16% to 1,339. The government recently announced that the  electricity rate and gas prices will go up by 5.3% from Tuesday (16th May 2023) to  help alleviate financial constraint on state-run energy companies. The decision was  delayed for more than a month amidst concerns of high living costs and economic  slowdown.

Australia

The Aussie dipped 0.66% to 0.666. The RBA latest minutes indicate that more rate  hike is still possible depending on the economy and inflation data, even after the  central bank surprised the market through 25 bps rate hike in early May meeting.  On the macro front, the consumer sentiment index by Westpac-Melbourne Institute  dropped to 79 or 7.9% decrease, worse than market expectation of 1.7% decrease.  The index’s components declined across the board.

Crude oil

Oil prices traded in red as weak China’s data outweigh the tight supply concerns.  Brent fell 0.43% to US$75 per barrel while WTI fell 0.35% to US$70 per barrel.

Gold

Gold fell 1.35% to US$1,989/oz.

Malaysia Highlights

The Ringgit weakened by 0.04% to 4.499 and traded within the range of 4.488 and  4.506. Sentiment in ASEAN currencies weakened especially after release of  slower- than-expected China economic data.

On another note, Moody’s Investors Service expects that Malaysia’s fiscal  consolidation will take more than three years due to narrow tax revenue base and  rigid operating expenditure. The rating agency expects the fiscal deficit-to-GDP  ratio to narrow to 3.6%, a more conservative forecast as compared to the 3.2%  target by the MoF over the same period.

Ringgit outlook for the week

The support level for USD/MYR is seen at 4.470 and 4.480 while resistance is  pinned at 4.520 and 4.530.

FBM KLCI

The FBM KLCI gained 0.43% to 1,424. Detailed transactions showed that the local  institutions were net buyers with RM105.2 million. Local retailers and foreign  investors, on the other hand, were net sellers with RM34.5 million and RM70.8 million, respectively.

Source: AmInvest Research - 17 May 2023