Snapshot Summary…

Global FX: The DXY rallied to its 1-week high by +0.57% to 100.88. A surge in bond yields supported the dollar

Global Rates: Sentiment was guarded in global bond markets ahead of Fed meeting later this month and after print of firm US jobs numbers

MYR Bonds: Malaysian government bonds closed sideways in a tight range while 7Y GII auction scored firm BTC of 2.295x

USD/MYR: MYR Was Held as Malaysia Released Weak Trade Numbers

Macro News

Japan: In June 2023, Japan's exports grew by 1.5% y/y, marking the 28th consecutive month of growth in shipments, supported by sustained foreign demand. Notably, exports of transport equipment surged by 38.0%, driven by substantial increases in motor vehicles and cars. However, machinery shipments fell by 1.5%, primarily due to declines in semiconductors and electrical machinery sales. Among trading partners, exports increased to the US, Hong Kong, Indonesia, Germany, India, Russia, and the EU, but declined to China, Taiwan, South Korea, and Malaysia.

Malaysia: Malaysia's total trade declined by 16.3% y/y (May 2023: -2.0% y/y) to RM222.1 billion, with exports falling by 14.1% y/y (May 2023: -0.9% y/y) to RM124.0 billion and imports declined by 18.9% y/y (May 2023: -3.7% y/y) to RM103.8 billion. The trade surplus widened to RM25.8 billion (May 2023: RM15.7 billion). For the first six months of 2023, exports now declined by 3.7% on average, and imports declined by 3.6% on average. On a month-on-month basis, exports increased by 3.7% m/m while imports declined by 5.4% m/m respectively.

Fixed Income

US Treasuries: Treasuries closed much weaker overnight with the 10Y up 10 bps to 3.85% while the 2Y rose 7 bps to 4.84%. Most global bonds retreated despite a lack of pertinent economic data except Aussie jobs numbers and US jobless claims which fell to a 2-month low. Mostly, sentiment was cautious after the past week’s strong UST gains and ahead of anticipated Fed hike this month.

Other Major Bonds: Both German and UK government bonds weakened overnight. Sentiment was guarded in global bond markets ahead of the Fed meeting later this month and after print of firm US jobs numbers. ECB is due to meet next week and anticipated to hike by another 25 bps. Germany’s 10Y rose 5 bps to 2.48% and the UK 10Y rose 6 bps to 4.27%.

MYR Government Bonds: Malaysian government bonds closed sideways in a tight range as the market was preoccupied with the 7Y GII reopening auction. The auction was aided by WI trade of 3.78% or higher side of prior day’s 3.79/73% WI quote. Final BTC was a firm 2.295x. The 10Y MGS closed unchanged at 3.81%.

MYR Corporate Bonds: PDS market was less active yesterday at RM207 million volume. However, gainers still overshadowed losers. Notable trades include AAA Aman 03/26 at 3.84% on RM30 million volume and AAA PASB 02/33 at 4.18% also on RM30 million volume.

Forex

DXY Index: The DXY rallied to its 1-week high by +0.57% to 100.88. A surge in bond yields supported the dollar. US weekly initial jobless claims unexpectedly fell by 9k to a 2-month low of 228k. The July Philadelphia business outlook survey rose 0.2 to -13.5, weaker than expectations of about -10.0.

EUR: Euro fell against the firmer US dollar, guided by stronger than expected US jobs data overnight. EUR/USD hit 1.113, down from 1.120 the day before.

GBP: The UK currency continued to fall after data earlier this week showed that the UK rate of inflation was at its slowest in more than a year at 7.9%. GBP/USD fell 0.6% to 1.287.

JPY: USD/JPY rose by 0.3% to 140.07. Ahead of Bank of Japan meeting next week, Governor Kazuo Ueda said this week there was still some distance to achieving its 2% inflation target, which dampened speculation of an announcement to change to its "yield curve control" policy next week.

CNY: Chinese yuan rallied amid support by PBOC including a stronger than expected reference rate. PBOC relaxed rules regarding capital flows. It allowed corporates to borrow more offshore. The aim is to avoid corporates to buy dollars onshore (thereby selling yuan). USD/CNY slid 0.5% yesterday.

AUD: The AUD was boosted after domestic jobs data beat expectations. Australia’s employment rose 36,200 in June, which beat expectations of about half the actual figure. Meanwhile, the unemployment rate stood at 3.5% in June, from 3.6% in May.

KRW: Korean won fell against the dollar in a cautious trading session. USD/KRW was in a range of half a percent higher yesterday, as sentiment was held back ahead of FOMC next week and as Korea’s stock market fell before spate of corporate earnings announcements also next week.

MYR: The ringgit fell against the dollar even as regional currencies strengthened, including the yuan. Sentiment for MYR was held back as traders stood watching gyrations in crude oil prices yesterday as well as the release of weak Malaysia’s trade numbers. The USD/MYR pair was at 4.543 or 0.1% higher.

Other Markets

Gold: Futures closed lower on Thursday amid US dollar strength and higher Treasury yields pushed prices to their first loss in three sessions.

Crude Oil: Oil prices rose on prospects for tighter global supplies. Russia’s oil shipments fell to its 6-month low of 3.1 million bpd in the four weeks ended July 16.

FBM KLCI: The FBM KLCI rose after two days of losses, up 0.26% to 1,406.69. Detailed transactions showed that foreign investors were the net buyers of RM71.0 million flows, while being offset by the net selling flow from local institutions and retailers with RM22.0 million and RM49.0 million, respectively.

US Equities: The Dow Jones rose for its ninth consecutive session. However, sell-off in Tesla shares after its earnings announcement signalled lowering of prices going forward weighed on the S&P 500. The Dow rose 0.47% to 35,225.19.

Source: AmInvest Research - 21 Jul 2023