Snapshot Summary…

Global FX: Dollar rebounded to above 106-level on improvement in business activity

Global Rates: Treasuries closed mixed overnight while German bund yields fell

MYR Bonds: The MGS market posted gains yesterday, in tandem with lower UST yields after briefly touching 5.00%

USD/MYR: Ringgit retraced some of its losses amidst mixed regional performances

Macro News

United Kingdom: The UK's unemployment rate increased by 2 puts to 4.2% in the three months ending in August, according to data from the Office for National Statistics (ONS). During the same period, the employment rate fell by 0.3 percentage points to 75.7%, equivalent to a loss of 82,000 jobs, following a 113,000 drop in the previous quarter. Additionally, job vacancies decreased to 988,000, down by 43,000, marking the 15th consecutive quarterly decline. The ONS attributed the delay in reporting these figures to low survey response rates and the implementation of a new methodology.

Euro Area: The IHS Markit Eurozone Manufacturing Purchasing Managers' Index (PMI) dropped to 43.0 in October 2023 from 43.4 in September, marking the lowest level in three months, according to preliminary estimates. The new orders received declined significantly, falling at a slightly faster pace compared to September. This led to a reduction in the backlogs of orders, which also decreased at a slightly faster rate.

Australia: The Judo Bank Flash Australia Manufacturing Purchasing Managers' Index (PMI) declined to 48 in October 2023, down from 48.7 in the previous month, according to a flash reading. This marked the eighth consecutive monthly deterioration in business conditions and the lowest figure in six months. The decline was primarily due to reductions in both output and new orders, reflecting a decrease in demand. Input costs rose sharply, with inflation reaching a seven-month high, largely driven by rising fuel costs.

Fixed Income

Global bonds: Treasuries closed mixed overnight. Weakness was seen on shorter dated 2Y to 5Y UST, but longer tenors were slightly in demand with the long bond 30Y UST down 3 bps to close at 4.96%. Weak manufacturing and Services PMI numbers in Europe and in Japan and Australia sent flows into bonds. German bund yields fell on the back of the weak data. Also, Germany’s November GfK Consumer Climate index fell to -28.1 from 26.7 previously. On the flipside, the US’ S&P Global Manufacturing PMI was firmer, gaining to 50.0 reading in October from 49.8 in September.

MYR Government Bonds: The MGS market posted gains yesterday, to align with the lower 10Y UST yields the day before where levels retreated to 4.85% after briefly touching the 5.00% level. The MGS was seen lower by 2 - 3 bps across the curve but most attention was on to the 7Y benchmark 04/30 which saw the yield taken to a low of 4.107% level despite yesterday’s tender result at the high of 4.188%.

MYR Corporate Bonds: Corporate Bonds continued to post losses as onshore sentiment remained pressured, especially with the weakness in the MYR. We noted high grade papers were leading to the losses. We saw 04/27 MAHB (AAA) up 20 bps to 4.15%, and 06/29 Danum (AAA) up 20 bps to 4.29%. Along with the AA segment, 08/28 Eco World (AA-) fell 7 bps to close at 4.54%.

Forex

United States: The DXY index gained 0.6% to close at 106.27 last night as the firmer US business activity supports the case for central bank to raise interest rate further. Both the S&P Global Manufacturing and Services PMI improved in October compared to September’s reading, suggesting the resiliency of the US economy.

Europe: The EUR fell 0.7% as the dollar firmed. The ECB Bank Lending Survey showed that the demand for loans by households and firms continued to fall sharply during 3Q2023. Banks also have tightened their requirements for granting loans as the industry become more pessimistic on economic outlook and lower liquidity due to tight monetary policy, suggesting that the ECB does not need to further raise its interest rate during the upcoming policy meeting later this week. The GBP, meanwhile, fell by 0.7% as well following mixed economic data released. UK’s flash manufacturing PMI improved to 45.2 from 44.3 in the prior month but remained in contractionary region since August last year. On the other hand, the number of people claiming for unemployment benefit rose by 20.4K for September after a decline 9K in August, reflecting the effects of elevated interest rate.

Asia-Pacific: The yuan remained stable at 7.31-level as the currency also found support from newsflow that China’s state fund Central Huijin Investment started buying exchange-traded funds (ETFs) to help prop up the sliding stock market. At the same time, the JPY weakened further to 149.91 after it reached intraday high of above 150- level in the previous session and after the BoJ announced an unscheduled bon buying operation, offering to buy JPY400 billion bonds with maturities of 5-25 years. Traders continue to be cautious for any intervention risks.

MYR: Ringgit appreciated slightly by 0.2% to settle at 4.786, reacting to the weakness in USD from the previous session. The currency also may have found some support given the Relative Strength Index (RSI) at 74.2 pointed to oversold position, and it has stayed in the oversold territory since last Thursday.

Other Markets

Gold: Gold price fell 0.1% to USD1,971/oz amidst the ongoing geopolitical conflict in the Middle East and recent weak economic data.

Crude Oil: Brent dropped 2.0% while WTI shed 2.3% as economic data released painted a bleak picture on the outlook especially in the European region, prompting worries on demand prospects.

FBM KLCI: The FBM KLCI shed 0.2% as both local retailers and foreign investors were the net sellers of Malaysian shares with MYR51.7 million and MYR16.1 million flow, respectively.

US Equities: Wall Street closed higher on positive corporate earnings with Dow Jones gaining 0.65, S&P500 climbing 0.7% and Nasdaq gaining 0.9%

Source: AmInvest Research - 25 Oct 2023