Snapshot Summary…

Global FX: The DXY Index Fell on Labour Market Data

Global Rates: Major Bonds Rallied on Signs of Slowing US Job Market

MYR Bonds: Ringgit Bonds Was Broadly Supported But Cautious Remained

USD/MYR: The Ringgit Strengthened Against the USD

Macro News

United States: Job openings fell by 338k to 8.827 million in July 2023, reaching the lowest level since March 2021, due to effects from Federal Reserve's monetary policy tightening. On the housing market, The S&P CoreLogic Case-Shiller 20-city home price index in the US fell by 1.2% in June 2023, marking the fourth consecutive months of decline due to the Fed's tightening path, with sharpest declines in Pacific and Mountain time zones. Compared to the previous month however, housing prices were 0.9% higher.

Japan: Japan's unemployment rate unexpectedly rose to 2.7% in July 2023 from 2.5% in June, contrary to market expectations. This marked the highest jobless rate in four months, with an increase of 110K in the number of unemployed individuals. Employment decreased by 100K, while the labor force increased by 20K. The nonseasonally adjusted labour force participation rate remained at 63.1%. Additionally, the jobs-to-applications ratio slightly decreased to 1.29, indicating the lowest reading since July 2022.

Fixed Income

Global bonds: The softer US job openings data released overnight indicated that a sign of cooling labour demand in the US economy. Report showed that the JOLT job openings fell to 8.6 million for July, down from 9.1 million in June and below market forecast of 9.4 million. Also, the Conference Board's Consumer Confidence Index fell to 106.1 in August from a downward revised 114.0. At the same time, the GfK Consumer Confidence in Germany declined slightly to -25.5 in September from -24.6 in the prior month. These had led the rally in global bond market with the UST and Bund markets saw gains across its curve. The 10Y UST yield dropped 8 bps while 10Y Bund yield fell 5 bps. The Gilt market, on the other hand, closed mixed with 10Y yield falling 2 bps while 2Y yield surged 22 bps as the expectations for the BoE to raise interest rate further remains amidst sticky inflation. In Asia, the JGBs posted decent gains as the 10Y yield fell 1 bps to close at 0.65% after Japan’s unemployment rate ticked higher to 2.7% from 2.5%.

MYR Government Bonds: Ringgit sovereign bonds were well supported across the curve, tracking the gains seen in the UST market from the previous session on safehaven bid but overall tone remained in cautious mode. The 10Y MGS yield closed lower at 3.84%, or 1 bps lower. The RM3 billion 15Y MGS auction closed with a decent BTC of 2.118x and averaged at 4.049%, around WI levels quoted. Post auction, the stock traded a tad stronger at 4.041% level but overall liquidity in the secondary markets remains muted.

MYR Corporate Bonds: The volume traded in the PDS market improved to RM598 million from RM497 million amidst bullish sentiment. It was led by RM90 million on 04/34 Danainfra Nasional, closed at 4.01% (+1 bps) and RM60 million on triple-A rated 06/27 Johor Corporation done at 4.42% (-2 bps).

Forex

US: Dollar was pressured by the lower US job opening. The DXY index slid below 104 to reach 103.43 by the afternoon US session before recovering slightly to 103.53. The index posted 0.5% lower at market close.

Europe: Weak JOLTS and consumer confidence index in the US supported both EUR and GBP which rose 0.6% and 0.3%, respectively. However, this is ahead of the Eurozone CPI print later this week which may pose challenges for Euro bulls.

Asia-Pacific: Most EM Asia currencies settled firmer yesterday as the USD index dipped below the 104 level during the Asian session ahead of the release of non-farm payroll prints which the market is looking at 170K (June: 187K) The PBoC set the midpoint CNY fixing yesterday at 7.1851, firmer than the previous fix of 7.1856, and over 1,000 pips stronger than market consensus as reported by Reuters. Traders still await China’s official PMI for August scheduled for Thursday where market is expecting for the reading to stay flat compared to a month ago at 49.4. JPY strengthened 0.5% against the USD to settle at 145.88 on data showing unexpectedly higher Japan’s unemployment rate. As CNY showed some strength, AUD also firmed as it hovered near 0.644, backing up further from past week's low of 0.638.

MYR: The ringgit closed stronger against the weaker USD whilst the dollar fell ahead of more incoming US labour market data later this week. Meanwhile, Malaysia is anticipating the implementation of National Energy Transition Roadmap (NETR) 2050 to add 10%-15% GDP over the course of the plan. The MYR rose 0.2% to close at 4.646.

Other Markets

Gold: Gold prices surged almost 1% on Tuesday, up to a 3-week high, boosted by weakness in USD and lower UST yields after sign of cooling US labour market.

Crude Oil: Crude prices were lifted with the WTI was up by about 1.3% overnight. The US dollar weakness provided fillip to oil prices, as well as recent news of stimulus in China through cutting tax on stock trading for the first time since 2008.

FBM KLCI: Malaysian equities rose yesterday, aided by interest in banking stocks especially amid positive earnings numbers this week. The FBM KLCI rose a firm 0.72%. Foreign investors were net buyers of MYR53.6 million shares yesterday.

US Equities: US stocks rallied on the back of demand for tech and industrial shares demand. The Dow rose 0.8%, or about 293 points. The tech-heavy Nasdaq rallied 1.7%.

Source: AmInvest Research - 30 Aug 2023