Snapshot Summary…

Global FX: Major Currencies Were Mixed as DXY Gained Ahead of Key US Inflation Data

Global Rates: The UST Market Closed Mixed Overnight Amidst Lack of Fresh Drive.

MYR Bonds: MGS yields inched higher by 1-2 bps across the curve despite healthier PDS market trading volume

USD/MYR: The Ringgit Weakened Amidst Mixed Regional Currencies Performance

Macro News

United Kingdom: The UK's unemployment rate reached 4.3% in July 2023, the highest level since 3Q2021. Unemployment rose by 159K to 1.46 million, driven by those unemployed for up to 12 months. Employment levels dropped by 207K to 32.88 million, mainly affecting full-time self-employed workers. Wages, excluding bonuses, saw a 7.8% y/y increase, the largest since comparable records began in 2001.

Australia: The Westpac-Melbourne Institute Consumer Sentiment index in Australia declined by 1.5% m/m to 79.7 in September 2023, remaining close to its lowest level since the 2020 Covid-19 pandemic. This drop followed a 0.4% decrease in August. Various factors contributed to this decline, including reduced household savings, a less hawkish outlook for the RBA (Reserve Bank of Australia), and concerns over budget and taxation.

Fixed Income

Global bonds: UST closed mixed overnight while there was little in terms of fresh drivers. There were no pertinent data to guide interest with the latest CPI numbers to be released this week and ahead of next week FOMC. The 10Y UST fell 1 bps to close at 4.28%. In Europe, Germany’s bonds closed mildly weaker ahead of ECB meeting. The Eurozone's September ZEW Economic Sentiment index fell to -8.9 from -5.5 in August while Germany's September ZEW index rose to -11.4 from -12.3. In Japan, Japan officials pushed back markets’ take of BOJ Governor Kazuo Ueda's remarks, indicating there is no large chance of exiting the negative rate regime this year.

MYR Government Bonds: Malaysia staged the reopening of GlI 09/26 which saw the WI level given to a high of 3.54% ahead of the tender closing. The tender then fetched a healthy BTC of 2.167x and resulted tender yield at an average of 3.539% level. MGS yield continued to move higher by about 1 - 2 bps across the curve. The 10Y MGS rose 1 bps to 3.88%.

MYR Corporate Bonds: The corporate bond segment recorded mixed movement yesterday. Sentiment was guarded alongside weak govvies trading. Trading volume was healthier at MYR410 million, up from MYR344 million in the previous day. Trades were scattered along AAA and AA rating segments, but some single-A papers also saw action including A3 Bank Islam perp at 4.73% on MYR30 million flows. On the AAA segment, Danga 01/28 closed at 3.88%, up 3 bps on MYR25 million flows.

Forex

US: Overnight, the USD managed to recover some losses incurred from the previous session ahead of key inflation data which can influence Fed’s interest rate outlook. The dollar index gained slightly by 0.1% to 104.71. On the data front, the National Federation of Independent Business (NFIB) Small Business Optimism Index fell slightly to 91.3 in August from 91.9 in July as high inflation and workers shortage remained as the main challenge for small business owners.

Europe: Against firmer dollar, the EUR was broadly stable as the ECB meeting on Thursday approaches. Nonetheless, the common currency was pressured by weakened confidence data; the ZEW Indicator of Economic Sentiment for Euro Area deteriorated to -8.9, reflecting still gloomy outlook. In the UK, the GBP shed 0.2% following mixed labour market data. While the unemployment rate rose to its highest level since late 2021, earnings growth remained robust at 7.8% y/y (excluding bonuses), the fastest pace on record.

Asia-Pacific: The CNY traded steadily following warnings from the PBoC against sharp currency depreciation. Early during the day, the central bank has set the midpoint rate at 7.1986 per U.S. dollar which is 873 pips firmer than Reuters' estimate. News flow also showed that that China's central bank is being sterner in scrutinising bulk dollar purchases by domestic firms. The JPY, meanwhile, gave up some gains, falling 0.3% to settle at 147.08. However, traders continued to digest BoJ Chief remarks which could be sign of the end of negative interest rate era and a possible intervention by the central bank as the yen is currently hovering around its weakest level since last September. The Aussie dollar was also on the downside in tandem with weak CNY and mixed confidence data. The Westpac Consumer Confidence Index deteriorated, remaining close to its 2020 pandemic level while NAB Business Confidence improved.

MYR: The USD/MYR weakened 0.1% and reached its lowest intraday level at 4.672 before closing at 4.680. We see short term USD/MYR R1 resistance at 4.710 and R2 at 4.730 whilst S1 support is eyed at 4.630 and S2 at 4.640. We foresee MYR to continue to be driven by outlook of no change in domestic interest rates, as well as ongoing CNY movement. Nevertheless, it is likely to be supported by firm oil prices.

Other Markets

Gold: Gold prices fell 0.4% to settle at USD1,914/oz as investors took to the sideline ahead of US key inflation data.

Crude Oil: Oil prices jumped by more than 1% to a near 10-month high on Tuesday on a tighter supply outlook and optimism on resilient economy according to OPEC’s monthly report.

FBM KLCI: Local bourses ends the day lower by 0.1% to 1,453 ahead of US inflation data. Both foreign investors and local retailers sold a net amount of MYR68.8 million Malaysian shares.

US Equities: Wall Street closed in the red higher on worries of higher US Fed interest rate due to elevated oil prices. Dow Jones fell 0.1%, S&P 500 fell 0.6%, and Nasdaq shed 1.0%.

Source: AmInvest Research - 13 Sept 2023