The US

The Dollar index weakened by 0.73% to 103.56. In May 2023, the ISM Manufacturing Purchasing Managers' Index (PMI) in the US decreased to 46.9 (April 2023: 47.1). Companies are adjusting their production levels to match demand in the first half of the year and preparing for growth later in the summer or early fall. However, there is a higher level of uncertainty in the business environment in May. New orders, inventories, and backlogs of orders also experienced contraction during this period.

Focus today will be on the US unemployment rate, where market is expecting an increase to 3.5% for May 2023 (April 2023 actual: 3.4%).

US Equities & Sovereign Bonds

Wall Street closed higher, where Dow Jones was up by 0.47% to 33,062, S&P500 increased by 0.99% to 4,221, and Nasdaq up by 1.28% to 13,101.

The UST10Y benchmark yield was down 5 bps to 3.595% and the UST2Y declined 6 bps to 4.341%, and the inverted differential narrowed to 75 bps.

Euro Area

The Euro was up 0.68% to 1.076. ECB President Christine Lagarde said that there is “no clear evidence” that core inflation has peaked in the region, vowing for further increase in key interest rates. This is after data showed the May inflation rate in the Eurozone fell to 6.1% y/y from 7.0% y/y and below than what market was expecting at 6.3% y/y.

The UK

The British Pound was up 0.68% to 1.253. Overall consumer credit grew 7.7% y/y in April 2023, the same pace compared to the prior month reading and the highest level since November 2018 amidst high living costs. At the same time, there were GBP1.4 billion of net mortgage repayments compared to zero new mortgage lending in March 2023, underpinning a fresh sign of weakness in the housing market.

Japan

The Japanese Yen gained 0.39% to 138.80. On the macro front, Japan’s manufacturing PMI improved to 50.6 in May 2023 (April 2023: 49.5), marking the fastest expansion since October 2022. Despite the decline in foreign orders, output and overall new orders expanded.

China

The Yuan gained by 0.16% to 7.098. The Caixin General Manufacturing PMI was at 50.9 for May 2023, with output and new orders reaching multi months high while foreign orders continued to expand. Sentiment among manufacturers, however, declined amidst slowing global trade.

South Korea

The Won was up 0.31% to 1,322. On macro front, South Korea’s exports contracted by 15.2% y/y, marking eight consecutive months of decline, as the sales of semiconductors plunged 32.6% y/y amidst weakening demand and falling chip prices. Exports for petroleum, petrochemicals, steel products, and computers also declined.

Australia

The Aussie gained 1.05% to 0.657. The Judo Bank Manufacturing PMI in Australia pointing a contraction since March 2023. The latest reading for May 2023 was 48.4, due to lower new orders coming from the external economies.

Crude Oil

Brent Was Up by 2.23% to USD74 Per Barrel and WTI Was Up by 2.95% to USD70 Per Barrel.

Gold

Gold Was Up 0.76% to USD1,977/oz, Continuing Its Upward Trend Throughout the Week.

Malaysia Highlights

The Ringgit weakened by 0.02% to 4.614. The S&P Global Malaysia Manufacturing PMI declined to 47.8 in May 2023 (April 2023: 48.8). This marks the ninth consecutive month of contraction in the manufacturing sector, with the steepest fall since January 2023, primarily due to weaker demand. New orders have been moderating for nine months, with the latest slowdown being the sharpest in three months, reflecting both domestic and international demand weakness. Purchasing activity also dropped significantly, marking the largest decline in nearly two years. However, employment stabilized, ending a four-month period of job creation.

Ringgit Outlook for the Week

The support level for USD/MYR is seen at 4.600 and 4.620 while resistance is pinned at 4.650 and 4.670.

FBM KLCI

The FBM KLCI went down by 0.30% to 1,383. Detailed transactions showed that the local institutions and local retailers were net buyers with RM7.0 million and RM34.7 million, respectively. Foreign investors were net sellers with RM41.7 million.

Source: AmInvest Research - 2 Jun 2023