The US

The Dollar index gained 0.39% to 103.89. According to new data from S&P Global, the US economy is experiencing its fastest growth rate since April 2022. The flash US composite PMI, which measures activity in the services and manufacturing sectors, reached 54.5 in May, surpassing the April figure of 53.4 and surpassing economists' expectations of 53.0. This is the highest level the index has reached in 13 months.

The latest Federal Open Market Committee (FOMC) minutes showed that policymakers are still open for further rate hikes, depending on the incoming data as inflation is still high from their point of view. Another point is that the FOMC expects a “…mild recession starting later this year, followed by a moderately paced recovery.”

US Equities & Sovereign Bonds

Concerns on the debt ceiling continues to affect the stock market. Wall Street closed lower as the Dow Jones was down by 0.77% to 32,800, S&P500 decreased by 0.73% to 4,115, and Nasdaq down by 0.61% to 12,484.

The UST10Y benchmark yield was up 5 bps to 3.742% while the UST2Y rose 6 bps to 4.376%, widening the inverted differential to 63 bps.

Eurozone

The Euro was down 0.19% to 1.075. German exports to China have experienced a significant decline of 11.3% in the first four months of the year compared to the same period last year. This drop has raised concerns in Germany's manufacturing sector, as it lags behind competitors who are benefiting from the rebound in Chinese demand.

The UK

The British Pound was down 0.39% to 1.237. Inflation decreased to 8.7% y/y in April 2023 (March 2023: 10.1% y/y), reaching its lowest level since March 2022. The decline was primarily driven by a slowdown in electricity and gas prices. Core inflation however accelerated to 6.8% y/y (March 2023: 6.2% y/y)

Japan

The Japanese Yen weakened 0.63% to 139.47 in May 2023. The Reuters Tankan sentiment index for manufacturers in Japan experienced a significant increase, rising from -3 in April to +6. This positive reading marks the first time this year that the index has turned positive. The improvement in sentiment reflects the ongoing recovery of the Japanese economy from the slowdown caused by the Covid-19 pandemic.

China

The Yuan weakened by 0.07% to 7.061. China has announced plans to strengthen auditing efforts in order to mitigate risks and stabilize economic growth. The country aims to ensure that policy initiatives are effectively implemented by auditing the work of ruling party officials, according to a report by state broadcaster. The focus of audits will be on providing support and financing to the real economy.

South Korea

The Won down 0.39% to 1,318. The Business Survey Index (BSI) for the manufacturing sector in South Korea rose to 73 in May 2023, compared to 70 in the previous month. Manufacturers reported an uptick in export-oriented demand, with a score of 70 compared to 64 in April 2023. Domestic demand and sales remained stable with scores of 74 and 78, respectively.

Australia

The Aussie weakened 1.00% to 0.654. In April 2023, the Westpac-Melbourne Institute Leading Economic Index in Australia remained unchanged compared to the previous month, indicating a flat reading. This marked the ninth consecutive month of negative growth, suggesting that the economic slowdown that began in late 2022 is likely to continue until the end of 2023 and possibly into early 2024.

Crude Oil

Oil prices traded higher where Brent was up by 1.98% to USD78 per barrel and WTI was up by 1.91% to USD74 per barrel.

Gold

Gold was down 0.91% to USD1,957/oz, continuing its downward trend after reaching the 2,000-level two weeks ago.

Malaysia Highlights

The Ringgit weakened by 0.46% to 4.594. The Malaysian government has established the MOU Evaluation Committee to transparently and comprehensively assess all memoranda of understanding (MOUs) signed between Malaysian and Chinese companies. The committee consists of members from various ministries and investment-related agencies. This evaluation process ensures a thorough review of the MOUs to safeguard the interests of Malaysia.

Ringgit Outlook for the Week

The support level for USD/MYR is seen at 4.550 and 4.570 while resistance is pinned at 4.600 and 4.650.

FBM KLCI

The FBM KLCI went down by 0.14% to 1,410. Detailed transactions showed that the local institutions and foreign investors were net sellers with RM0.4 million and RM33.1 million, respectively. Local retailers were net buyers with RM33.5 million.

Source: AmInvest Research - 25 May 2023