Macro News

The US: US CPI decreased to 4.0% y/y in May 2023 (April 2023: 4.9% y/y), reaching its lowest level since March 2021, primarily driven by lower energy prices. The core inflation rate also decreased to 5.3% y/y (April 2023: 5.5% y/y), the lowest since November 2021. These latest numbers support the argument for the Federal Open Market Committee to consider pausing its current cycle of monetary tightening later this Thursday.

The UK: The unemployment rate in the UK for the period of February to April 2023 was 3.8%, a slight increase of 0.1 ppts compared to the previous quarter. The increase in the number of unemployed individuals was driven by those who had been unemployed for up to 12 months, with an additional 52,000 people becoming unemployed, bringing the total to 1.31 million.

Malaysia: Malaysia is facing a shortage of electric vehicle (EV) charging stations to meet the increasing demand for EVs, as there are only around 1,000 EV charging stations operational in the country, falling far short of the target of 10,000 stations by 2025 set by the Minister of Science, Technology, and Innovation (MOSTI).

Fixed Income

US Treasuries: UST weakened overnight after reversing early day gains on the back of slower-than-expected May CPI. In addition, though expectations for a Fed hike this week have fallen further to just 5.8% down from 20.9% the day before, UST still weakened but mostly on technical after belly yields approached 200-day moving averages. The 2Y UST rose 9 bps to 4.67% and the 10Y up 8 bps to 3.81%.

Other Major Bonds: German and UK govvies weakened as well, ahead of anticipated ECB hike this month and next. Interest rate-sensitive 2Y bunds rose 4 bps to 3.02% to highest level since mid-March.

MYR Government Bonds: MGS got a lift from PBoC cut its 7-day Reverse Repo Rate by 10 bps to 1.90% from 2.00%. MGS/GII yields eased slightly by 0.5-2.5bps while market participants were cautious ahead of US CPI release and US FOMC meeting. The 10Y MGS was unchanged at 3.73% while on the front of the curve the 3Y MGS unchanged at 3.45%.

MYR Corporate Bonds: Credits were aided by firm MGS showing, with yield declines outpaced rises by 2-to-1. The traded amount was at RM396 million. Notable trades include PLUS 01/36 (AAA) at 4.42% (RM50 million volume) and Danga 01/33 which was in demand as it fell 3 bps to 4.11% (RM30 million). Also, there was RM60 million on Cagamas 12/27 as it yield climbed 2 bps to 3.95%.

Forex

DXY Index: The dollar index traded lower and reached as low as 103.05 prompted by the softer-than-expected US inflation at 4.0%, beating estimate of 4.1% and marked the slowest growth since March 2021. At the same time, the market has become increasingly convinced the US Fed will pause this time around when the meeting concludes on Wednesday but the expectation for July’s rate hike remains. The currency retraced back some its losses and closed the session at 103.34 or 0.3% lower.

EUR: Alongside the weaker DXY, the Euro firmed 0.3% to 1.079 with the ECB is widely anticipated to increase its interest rate by 25 bps on Thursday.

GBP: The British pound was bullish and climbed 0.8% to close near its intraday high at 1.261. Combined with easing US inflation, the GBP also profited from stronger labour market data through softer unemployment rate (3.8% vs. consensus 4.0%) and faster-than-expected wage growth (7.2% vs. consensus 6.9%).

JPY: The Japanese yen however, depreciated 0.4% to 140.22 as the BoJ remains distinct from global central banks and is expected to maintain accommodative policy stance on Friday meeting.

CNY: The Chinese yuan fell as well following PBoC’s surprise move cutting short-term interest rate seven-day reverse repo by 10 bps to 1.9%, which may open the path for further rate cuts on one-year loan rate later on Thursday. By the end of the session, the CNY closed 0.3% weaker at 7.165.

AUD: The AUD/USD climbed 0.2% further to 0.677. Data showed that consumer confidence remains Covid-19 lows at 79.2 during June 2023 while business confidence deteriorated to negative territory at -4. Taken these together, the outlook for Australian economy seemed cloudy amidst high inflation and elevated interest rate.

KRW: Won appreciated 1.3% to 1,271. Minutes from the 25th of May meeting showed that Bank of Korea board members warned there is need to keep the policy level restrictive to ensure inflation to go down back to 2.0% level and additional rate hike in the future should not be fully discounted.

MYR: The ringgit firmed with USD/MYR pair falling 0.1% to close the day at 4.615 while traded within the range of 4.615 and 4.628, in tandem with most regional currency performances. Malaysia has secured RM8.3 billion of investment commitments during the investment mission in London Tech Week 2023, which was led by Communications and Digital Minister. According to him, the investments are expected to create no less than 1,800 jobs for Malaysian people.

Other Markets

Gold: Gold eased 0.7% to USD1,944/oz as spotlight now is on US Fed meeting.

Crude Oil: Oil prices traded higher as rate cut by PBoC in China may signals for more stimulus to be deployed to revitalize China’s economy, one of the largest oil importers globally. Brent rose 3.4% to USD74 per barrel while WTI gained 3.4% to USD69 per barrel.

FBM KLCI: The FBM KLCI shed 0.4% to 1,381. Detailed transactions showed that foreign investors were the net sellers with RM78.4 million flow, respectively, while being offset by the net buying flow from local institutions and retailers with RM40.4 million and RM38.0 million flow.

US Equities: Wall Street closed firmer as the Dow Jones gained 0.4% to 34,212, S&P500 rose 0.7% to 4,369, and Nasdaq ticked higher by 0.8% to 13,573.

Source: AmInvest Research - 14 Jun 2023