Snapshot Summary…

Global FX: The US dollar fell as it tracked the decline in Treasury yields

Global Rates: Ahead of NFP, major bond markets rallied on weaker than expected jobless claims and continued crude oil price decline

MYR Bonds: The net selling pressure of past 2 days was halted amid the UST rally

USD/MYR: The ringgit closed firm, guided by weaker US dollar, and drop in US bond yields the day before

Macro News

World : The World Trade Organization (WTO) has revised its estimate for global exports growth this year, cutting it in half due to a manufacturing slowdown and increasing geopolitical tensions causing trade patterns to fragment. The organisation now anticipates that the volume of world merchandise trade will only grow by 0.8%, a significant downgrade from its earlier forecast of 1.7% growth in April.

United States : In August 2023, the US trade deficit shrank to $58.3 billion, its lowest level since September 2020. This positive change resulted from a 1.6% increase in exports, led by products like crude oil, travel, fuel oil, computer accessories, pharmaceuticals, semiconductors, and financial services. However, there were declines in the sales of passenger cars and certain vehicles. Imports, on the other hand, decreased by 0.7% to $314.3 billion, with reduced purchases of cell phones, semiconductors, and electric apparatus, although there were increases in imports of crude oil, finished metal shapes, travel, and transport.

Australia: Australia's trade surplus expanded to AUD 9.64 billion in August 2023, rising from a downwardly revised AUD 7.3 billion in July. This increase was attributed to a 4% growth in exports to a three-month high of AUD 55.67 billion, marking the first increase in three months. The boost in exports was notably driven by higher shipments to China, Australia's leading trading partner. On the other hand, imports declined by 0.4% to AUD 46.05 billion, primarily due to reduced imports of non-industrial transport equipment.

Fixed Income

Global bonds: The UST market closed mixed as the yield curve noticeably steepened with shorter tenor yields shedding 3 – 4 bps while 20Y~30Y yields climbing 2 – 3 bps. This was after initial jobless claims rose to 207K last week from 205K during the week ended 23

MYR Government Bonds: In the local space, the net selling of the past 2 days was halted amid the UST rally. However, markets were defensive for much of the day and the main focus was on the MYR3.5 billion 20Y MGS auction which saw a soft reception of only 1.73x bid-to-cover ratio, averaging 4.487%. As a result, the MGS curve steepened with the yields rising 2 – 4 bps on the belly to the back-end of the curve.

MYR Corporate Bonds: Trading volume in the PDS market improved slightly to MYR356 million from MYR245 million with losers outpaced gainers. The market fell amidst the “higher-for-longer” rates narratives and ahead of NFP data due later tonight. Among notable trades were MYR30 million on 08/39 Prasarana (GG rated) done at 4.45%, MYR30 million on 06/25 Sabah Development Bank (AA1 rated) done at 4.78% compared to its coupon rate of 5.05%, and MYR30 million on 04/29 MMC Port done at 4.39%.

Forex

US: On Thursday, the US dollar fell and retreated further from recent highs, tracking the decline in Treasury yields while providing stronger levels for the yen, sterling, and euro. This comes ahead of the NFP report. The DXY fell 0.4% to settle at 106.33. Initial jobless claims for the week ending 30th September fell by 2K to 207K. Continuing jobless claims for the week ending 23rd September fell 1K to 1.664 million.

Europe: ECB policymaker Peter Kazimir said that the rate hike in September may be the last in this cycle although the central bank cannot be certain in lieu of incoming data for their meetings in December and March. As the USD declined, the euro surged 0.4% to1.055 while GBP rose 0.5% to 1.219.

Asia-Pacific: Japanese yen was stronger against a weaker US dollar on Thursday as markets witnessed UST yields backing down from multi year highs. USD/JPY fell further after earlier this week the pair hit 150. The Australian dollar was also stronger on Thursday, aided by the weaker US dollar, despite RBA this week holding its policy rate - though signalling from the central bank is that more rate hike(s) is possible due to the still high inflation rate.

MYR: Malaysia’s ringgit closed firm yesterday, guided by weaker US dollar and drop in US bond yields the day before. However, we anticipate cautious trading today as we have the US non-farm payrolls after hours.

Other Markets

Gold: Gold remained pressured following the recent spike in USD and UST yields, declining 0.1% to USD1,820 per oz. Gold is down 2.4% w/w.

Crude Oil: Crude oil fell further on Thursday with Brent down 2% to follow the large 5.6% decline the day before as continued worries over global interest rate direction pressured sentiment. The market shrugged aside OPEC+ confirming no changes to output cuts this quarter. Meanwhile, Russia said that there is no set deadline for lifting the fuel export ban introduced in September.

FBM KLCI: The FBM KLCI finished little changed yesterday as early gains gave way to late net selling activity. Malaysia’s stock market mirrored the rest of the region where there was mixed momentum seeing a dip in USD and UST yields during the Asian session.

US Equities: The US stock market closed slightly lower overnight as sentiment was guarded ahead of the NFP release. The Dow index fell 0.03%, S&P 500 fell 0.1% and the Nasdaq fell 0.1%.

Source: AmInvest Research - 6 Oct 2023