Snapshot Summary…

Global FX: Dollar slid on Friday to pare last week’s gain with release of slower-thanexpected July non-farm payrolls

Global Rates: Treasuries rallied on Friday. Gains were slanted on tenors up to 10Y. This brought a mixed close for the week

MYR Bonds: Government Bonds Closed Mixed Ahead of NFP Print

USD/MYR: MYR Settled the Week at 4.554

Macro News

United States: In July 2023, the US unemployment rate declined to 3.5%, below market expectations of 3.6%. The number of unemployed individuals decreased, and employment levels increased. The U-6 unemployment rate, including discouraged workers and part-time employees, also improved to 6.7%. The labour force participation rate remained stable at 62.6%, its highest since March 2020.

Eurozone: Retail sales went down 0.3% from a month earlier in June 2023, after a revised 0.6% rise in May. Sales fell for food, drinks, tobacco (-0.3%) and non-food products (-0.2%). On the other hand, sales rose for automotive fuel and by mail orders and internet. On a yearly basis, retail trade dropped 1.4%, following a 2.4% decline in May.

Fixed Income

US Treasuries: Treasuries rallied on Friday where gains were slanted on tenors up to 10Y. This brought a mixed close for the week where tenors <10Y gained but 10Y and longer ended weaker for the week. The 10Y UST fell 14 bps on Friday but was 8 bps higher w/w. The 2Y fell 12 bps to 4.78% on Friday and was 11 bps lower w/w. The softer-than-expected US non-farm payrolls for July as well as downward revision of May and June figures had supported UST. Atlanta Fed President Raphael Bostic (nonvoter) said there is no need for more rate hikes because the jobs market is slowing down.

Other Major Bonds: Bund yields closed lower on Friday despite an intraday surge. The ECB said in an article on Friday that underlying inflation had likely peaked in 1H2023. In the meantime, BOE chief economist Huw Pill said the past 18 months of hikes are working to tame down inflationary pressures. The 10Y JGBs fell from a nineyear high of 0.66% to close at 0.65% on Friday (-0.4 bps). BOJ purchased JPY400 billion of JGBs on Thursday and JPY300 billion last Monday.

MYR Government Bonds: Ahead of NFP data release, MYR bonds closed mixed on Friday but weaker for the week. Longer dated MGS were pressured, ahead of MYR3.0 billion 30Y GII reopening (plus MYR2.0 billion private placement). WI quotes at higher level of 4.33/38% but nothing was done. WI was 4.28/20% the day prior.

MYR Corporate Bonds: Ringgit corporate bonds closed firm on thinner trading volume of RM615 million, down from RM1.07 billion in the previous session. Leading the activities include AA1 YTL Power Int 05/27 (-2 bps) on RM60 million flows and nonrated quasi paper Danainfra 11/32 on RM50 million done at 3.98% (unchanged).

Forex

DXY Index: The dollar slid on Friday and trimming last week’s gain with the release of slower jobs growth. Markets now await the latest US CPI data this week where median Bloomberg consensus is looking for the core headline inflation to ease to 4.7% y/y compared with July’s reading of 4.8% y/y.

EUR: The euro appreciated, and intraday level reached above the 1.100 mark despite mixed developments in Eurozone’s data. June’s Eurozone retail sales fell 0.3% m/m, Germany’s June factory orders rose 7.0% m/m, France’s June industrial production fell 0.9% and Italy’s industrial production rose 0.5% m/m.

GBP: The pound advanced to hover near 1.269 against the weaker dollar post NFP release. GBP/USD rose 0.3% to 1.275.

JPY: The Japanese yen was on the weaker side before the NFP release with USD/JPY testing 142.8 level but ended the New York session firmer after the soft NFP release. At the same time, traders continued to mull effects on the currency from the YCC policy alteration and BOJ coming in to purchase JGBs last week.

CNY: CNY pared losses versus the USD. The yuan remained lacking in support amid the downbeat China growth and easier monetary policy at PBOC outlook vis-à-vis the Fed and major central banks. USD/CNY ended the week near 7.170 after reaching above 7.180 intraday. Weak Caixin manufacturing PMI weighed on CNY last week.

AUD: The Australian dollar headed towards its third straight week of losses. Pause by the RBA last week pressured the AUD. However, weaker NFP data on Friday may support AUD this week.

KRW: Korean won pared losses on Friday though it completed a full week of losses. USD/KRW pair rose 2.6% to 1,310 from 1,277 the week before. Domestic data in past week were hardly supportive of the KRW, including lower exports and CPI.

MYR: The ringgit was on firmer footing last Friday even before the July NFP release. USD/MYR fell 0.03% to 4.554. This week, the focus will be on June’s industrial production data (median Bloomberg consensus: -0.9% vs. prior 4.7%)

Other Markets

Gold: Gold prices firmed slightly after the previous three days’ weakness as the weak NFP triggered fresh doubts whether the Fed will continue to hike, and thus prompting some inflationary concerns. Gold rose 0.5% to USD1,943/oz.

Crude Oil: Oil prices sustained strength and remained on steady pace began over a month ago on outlook for tighter global supply due to Saudi and Russian. Both aforementioned producers extended cuts through September.

FBM KLCI: KLCI rose 3.36 points or 0.2% to 1,445. Banks led gains in KLCI. Foreign investors were net buyers of RM42.3 million Malaysian shares on Friday, an improvement from RM85.9 million net selling on Thursday.

US Equities: US equities fell amid further decline in risk appetite. The S&P 500 fell 0.53%, Dow fell 0.43% and Nasdaq by 0.32%.

Source: AmInvest Research - 7 Aug 2023