Snapshot Summary…

Global FX: Dollar retreats from recent highs following mixed data released on Friday night with core PCE coming in at below 4.0%

Global Rates: UST, Bunds, and Gilts closed firmer as softer economic data builds the case for safe haven bid. BoJ stepped into the market to buy JGBs

MYR Bonds: MGS Was Fairly Supported While Gainers Were Seen Dominating in the PDS Market

USD/MYR: Ringgit Benefitted From General USD Weakness During the Day

Macro News

United States: The Personal Consumption Expenditure (PCE) increased by 3.5% in August 2023, the highest in four months (July 2023: 3.4%). This was in line with market expectations. On a monthly basis, PCE prices rose by 0.4%. However, core PCE inflation dropped to 3.9%, the lowest since September 2021, with the monthly rate easing to 0.1% from July's 0.2%. Meanwhile, a government shutdown was avoided after the deal was reached over the weekend, allowing the government to stay operated for 45 days.

Euro Area: In September 2023, the Euro Area's inflation rate dropped to 4.3%, the lowest since October 2021. This slowdown was influenced by slower price increases in services, non-energy industrial goods, and food, alcohol & tobacco, while energy costs saw deeper deflation. Core inflation, which excludes volatile items like food and energy, also cooled to 4.5%, its lowest level since August 2022.

United Kingdom: The United Kingdom's economic growth remained at 0.2% in the 2Q2023, matching the previous estimate. The growth was driven by a 0.5% increase in household consumption, supported by spending on various categories. Fixed investment rose by 0.8%, primarily due to a 4.1% increase in business investment, while government consumption expenditure increased by 2.5%. However, net trade had a negative impact on GDP, with exports falling by 0.9% and imports rising by 2.2%.

Fixed Income

Global bonds: US Treasuries closed firm on the last day of 3Q2023, though still closed weak w/w, pressured by the Fed’s higher-for-longer rates outlook. New York Fed President Williams said the Fed may keep at rates restrictive levels for "some time." On Friday, Treasuries rallied after print of mixed global economic data, including slower US PCE inflation. There was also a hint of safe haven demand during the sesssion as there was still uncertainty in Washington to strike a stopgap deal to prevent a government shutdown. The PCE Price Index was at +0.4% m/m but core PCE was lower than expected at +0.1% m/m vs consensus +0.2%. On y/y basis, headline PCE was +3.5% versus an upward revised +3.4% in July. However, the core PCE index was lower at +3.9% y/y vs +4.3% in July. Aside, Bunds and Gilts also rose on Friday. UK’s 2Q2023 GDP was up 0.2% q/q, as expected, vs 0.3% last quarter, as well as +0.6% y/y vs 0.5% last quarter. The Eurozone's September CPI was +0.3% m/m vs +0.5% prior month, and +4.3% y/y vs 5.2% prior month. Lastly, BoJ came to the support and reportedly bought JGBs worth JPY300 billion.

MYR Government Bonds: On Friday, the MGS market was fairly quiet in the morning as player was seen to side-line due to the ongoing jittery UST level over the holiday period in Malaysia the then looming uncertainty over potential US government shutdown. Support for MGS was noted later on after BoJ announced intention to support JGBs via purchases.

MYR Corporate Bonds: Malaysia’s corporate bonds mainly saw gainers on Friday. Meanwhile, total traded volume was MYR467 million, was down from MYR1.1 billion traded on Wednesday. Heavier volume traded papers include AAA rated SEB 11/33 at 4.26% (unchanged), AAA Amanat Lebuhraya 10/28 at 4.18% (+2 bps), and quasi name Danainfra 04/44 at 4.41% unchanged.

Forex

US: The US dollar fell from recent highs last Friday, pressured by mixed data including personal spending and the PCE price index. US personal spending was +0.4% m/m, in line with the market forecast and after +0.9% in July.

Europe: EURUSD found support from a weaker dollar, but gains were limited after Friday's economic data showed Eurozone September consumer prices rose less than expected and German Aug retail sales unexpectedly fell the most in eight months by 1.2% m/m. ECB Governing Council member Kazaks said, "Interest rates will probably remain steady for an extended period." Meanwhile, UK’s GDP for 2Q2023 was confirmed at 0.2% q/q, slower than 1Q2023 of 0.3% q/q, highlighting cloudy economic prospect for the country amidst high interest rate and elevated living cost environment. The GBP held steady at 1.220.

Asia-Pacific: US dollar retreating from recent highs during the Asian session last Friday helped Asian currencies including CNY ahead of the long China holiday as well as before the weekend release of Caixin/S&P PMI data release. On the flipside, the Caixin/S&P Global manufacturing PMI fell to 50.6 in September from 51.0 in the previous month. JPY sentiment was also supported amid the dollar reversal though movements were volatile and USD/JPY still within sight of 150 level. Japan's September Tokyo CPI was +2.8% y/y (August: +2.9%) and Tokyo Core CPI was +2.5% y/y (August: +2.8%).

MYR: The ringgit ended Friday on firmer level vis-a-vis the weaker US dollar but showed mixed performances on the crosses. Sentiment for MYR remained weak alongside the hawkish Fed and in face of global risk aversion.

Other Markets

Gold: Gold Prices Fell Ahead of the US Government Shutdown and Release of US PCE Price Data.

Crude Oil: Global crude prices fell amid the release of weak global economic data, especially in Europe.

FBM KLCI: Malaysian stocks closed weaker last Friday, pressured by downbeat global markets i.e., US shutdown and high global crude oil price.

US Equities: US stocks fell after the release of US PCE prices data on Friday. The Dow Jones Industrial Average index fell 0.47%, to 33,507.5, and the S&P 500 fell 0.27% to 4,288.05.

Source: AmInvest Research - 2 Oct 2023