The US

The Dollar index gained 0.35% to 104.25. In 1Q2023, the US economy  experienced growth of 1.3% q/q annualised, slightly higher than both the advance  estimate of 1.1% and market forecasts of 1.1%. The updated estimate mainly  reflects an upward revision in private inventory investment. The increase in real  GDP was driven by rises in consumer spending, exports, federal government  spending, state and local government spending, and non-residential fixed  investment. However, looking at the bigger picture, the US economic growth has been slowing from 3.2% in the 3Q2022 and 2.6% in the 4Q2022.

US equities & sovereign bonds

Wall Street was mixed after the slower GDP numbers. Dow Jones was down by 0.11% to 32,765, while S&P500 increased by 0.88% to 4,151, and Nasdaq up by 1.71% to 12,698. 

The UST10Y benchmark yield was up 8 bps to 3.817% while the UST2Y rose 16 bps to 4.533%, widening the inverted differential to 72 bps.

Eurozone

The Euro was down 0.23% to 1.073. The German economy experienced a  technical recession in the 1Q2023 due to reduced household spending. The  German statistics office revised the GDP growth rate to -0.3%. The economic downturn is attributed to various factors, including the impact of Russia's invasion  of Ukraine and the subsequent decision of European leaders to sever ties with  Moscow. German households significantly reduced their spending with final consumption expenditure dropping by 1.2%.

The UK

The British Pound was down 0.36% to 1.232. The International Monetary Fund  (IMF) stated that the UK will avoid a recession this year, crediting the government's decisive actions to restore stability. However, the IMF warned that persistent inflation could be a risk if interest rates were not kept high. The fund also cautioned against tax cuts, as they could hinder efforts to control inflation and fund necessary investments for long-term growth.

Japan

The Japanese Yen weakened 0.42% to 140.06. The Japanese government has revised its outlook on the country's economy due to better private consumption and business investments. In its monthly report for May, the Cabinet Office described the economy as "recovering at a moderate pace," citing improved exports and production. The upgrade in the forecast was due to better exports performance over the period since December 2020.

China

The Yuan weakened by 0.28% to 7.080. According to a survey conducted by the  Cheung Kong Graduate School of Business in Beijing, investor sentiment towards the market and the growth potential of the Chinese economy has become more positive. However, the survey also indicated that investors remain pessimistic about the real estate sector. The number of people willing to invest in real estate has been declining since August 2020, and in the latest survey, only 52.7% of investors believed that real estate prices would increase in the future.

South Korea

The Won was down 0.65% to 1,326. The Bank of Korea decided to keep its base rate unchanged at 3.50%, as anticipated. This marks the third consecutive meeting in which the central bank has held rates steady. The decision comes as inflation appears to be moderating and the economy experiences a slowdown.

Australia

The Aussie weakened 0.60% to 0.651. The AUD has been negatively affected by a combination of factors recently, including sentiment surrounding the progress in raising the US debt limit and disappointing economic data from Australia. The upcoming retail sales data for April 2023 in Australia is forecasted at 0.1% m/m  based on consensus, compared to the previous actual figure of 0.4%.

Crude oil

Oil prices traded lower where Brent was down by 2.68% to USD76 per barrel and WTI was down by 3.57% to USD72 per barrel.

Gold

Gold was down 0.80% to USD1,941/oz, continuing its downward trend after reaching the 2,000-level two weeks ago.

Malaysia Highlights

The Ringgit weakened by 0.72% to 4.627. In March 2023, Malaysia's leading economic index experienced a decline of 1.1% compared to the previous month.  This reversal followed a notable 2.9% gain in February 2023, which was the highest level since July 2020. The drop was primarily driven by decreases in four out of  seven components including expected sales value in manufacturing (-0.6%), real imports (-0.5%), the number of approved housing units (-0.3%), and money supply  (-0.1%).

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 0.51% to 1,402. Detailed transactions showed that  the local institutions and foreign investors were net sellers with RM2.3 million and  RM25.6 million, respectively. Local retailers were net buyers with RM27.9 million.

Source: AmInvest Research - 26 May 2023