Snapshot Summary…

Global FX: Greenback continued its descend despite some hawkish remarks by Fed officials. EUR and GBP on front footing

Global Rates: US Treasuries, rallied while mixed sentiments were seen in Germany Bunds and UK Gilts

MYR Bonds: Local bond market started the week on slow-grind mode with very little action seen

USD/MYR: Malaysian ringgit started the week on weaker footing amidst mixed regional currencies’ performance

Macro News

United States: One-year forward consumer inflation expectations for June 2023 decreased to 3.8% (May 2023: 4.1%) in May. Expectations for price changes also showed some shifts, with gas and food prices expected to decrease slightly, while college education, medical care, and rent prices were expected to increase.

China: China's inflation in June 2023 was at 0.0% y/y. This was the lowest reading since deflation occurred in February 2021. The cost of transportation fell further, decreasing by 6.5% y/y. On the other hand, food prices rose the most in three months, increasing by 2.3% y/y (May 2023: 1.0% y/y), driven by higher costs of fresh vegetables and eggs despite a sharp fall in pork prices. Core inflation rose by 0.4% y/y (May 2023: 0.6% y/y), the smallest gain since March 2021.

Malaysia: Malaysia's unemployment rate remained at 3.5% in May 2023. The number of unemployed individuals decreased to 584.6K (April 2023: 586.9K), while employment increased to 16.28 million (April 2023: 16.25 million). Additionally, the labor force participation rate remained at 70.0%.

Fixed Income

US Treasuries: Shorter tenors rallied for the second consecutive day. Atlanta Fed President Bostic, (non-voter) said that inflation could slow to 2.0% without additional rate increases. Treasuries were additionally supported by release of China's June CPI which contracted by 0.2% m/m (May: -0.2%) and flat y/y (May: 0.2%). June PPI was down 5.4% y/y (May: -4.6%). The 10Y UST fell 4 bps to 4.01% while the 2Y fell 9 bps to 4.85%.

Other Major Bonds: Germany’s 10Y yield rose slightly by 0.3 bps to 2.64%. ECB policymaker Villeroy de Galhau said that the peak interest rate policy will be reached soon and that the inflationary peak has passed in France. UK 10Y bond yield shed 1 bps to close at 4.64%.

MYR Government Bonds: Local bond market started the week on slow-grind mode with very little action seen as players weighed BNM’s neutral-pause MPC statement against still-climbing KLIBOR rate and upcoming political noise as state election is around the corner. 3Y-5Y part of the curve seen some action with levels little-changed while elsewhere the yield curve was quiet.

MYR Corporate Bonds: Ringgit corporate bonds closed mixed to follow the lacklustre trading activity in the govvies segment yesterday. Traded volume was decent at RM338 million compared with RM247 million seen last Friday. Notable trades include AAA Sarawak Energy 06/25 at 3.85% on RM40 million volume as well as AAA PLUS 01/33 at 4.22% on RM20 million volume.

Forex

DXY Index: The dollar index fell 0.3% to 101.97 as market players dismissed Fed Loretta Master’s (non-voting) hawkish remarks in an anticipation of US inflation data. She noted that underlying price pressures are still strong, and more rate rises are needed to ensure inflation will go down to 2.0% target. Such a remark is not identical to one given by the Atlanta Fed.

EUR: The euro rose 0.3% to 1.100. European stock market Stoxx 600 closed slightly higher by 0.2% to 448.41 after reversing early session’s losses with travel and leisure stocks led the gains as investors await for US inflation data to gauge future US Fed rate path.

GBP: The pound climbed 0.2% to 1.286. BoE governor Andrew Bailey insisted that inflation in the UK will fall “markedly” in 2023 as the central bank is expected to keep raising interest rates amidst stubborn inflation.

JPY: The Japanese yen continued to be firm, posting gains of 0.6% to close at 141.31 as currency intervention prospect is looming in the market. On another note, the BoJ stated in its quarterly report that broader small and medium sized enterprises in many regional areas have aggressively raised wages due to labour shortage, underscoring the growth in wages which meets the BoJ’s target in raising inflation.

CNY: The Chinese yuan weakened by a slight 0.01% to 7.226 following the tepid than expected China’s consumer inflation in June. At the same time, producer inflation fell at its fastest pace in more than seven years.

AUD: The Aussie dollar dipped 0.2% to 0.668 in tandem with weaker yuan. On the macro front, new building approvals rose 20.6% m/m on seasonally adjusted basis in May 2023 after contracted 6.8% m/m in the previous month.

KRW: The Korean won weakened 0.1% to 1,306. South Korea’s Financial Service Commission asked major commercial banks to prepare USD4 billion of financing to support MG Community Credit Cooperatives (MGCCC) which has nearly 1,300 branches nationwide, hit by customer withdrawals as public were concerned on its record-high delinquency rates with some branches reporting 20% defaulting rate amidst high interest rate and cooling property sector. It was an effort by authorities to calm the public to prevent spill over effects in the financial system

MYR: USD/MYR depreciated 0.1% to 4.671 as risk appetite was generally absent amid declining oil prices as well as awaiting US CPI numbers to be released later this week.

Other Markets

Gold: Gold prices was steady at USD1,925/oz ahead of the US inflation data.

Crude Oil: Oil prices eased but tight supply prospect provided some support. Brent fell 1.0% to USD77 per barrel while WTI fell 1.2% to USD73 per barrel.

FBM KLCI: The FBM KLCI started the week on positive note, climbing 0.39% to 1,383. Detailed transactions showed that local institutions were the net buyers with RM82.0 million flow, while being offset by the net selling flow from foreign investors and local retailers with RM70.5 million and RM11.5 million, respectively.

US Equities: Wall Street closed higher with. Dow Jones rising 0.6% to 33,944, S&P500 gaining 0.2% to 4,410 and Dow Jones rising 0.2 % to 13,685.

Source: AmInvest Research - 11 Jul 2023