Snapshot Summary…

Global FX: The dollar index weakened as risk appetite improved

Global Rates: Treasury market started the week weaker ahead of US Fed meeting while Bund rallied

MYR Bonds: The MGS/GII market had a quiet day ahead of this week’s key central bank meetings

USD/MYR: The ringgit closed moderately stronger amidst mixed regional currencies performance

Macro News

Global Oil Price : According to the World Bank’s baseline forecast, oil prices are expected to average USD90/barrel in 4Q2023 before declining to USD81/barrel in 2024 as global economic growth slows with the conflict’s effects on global commodity markets have been limited so far. Under three downside risk scenarios namely “small disruption”, “medium disruption” and “large disruption”, prices would increase to USD93-102/barrel, USD109-121/barrel and USD140-157/barrel respectively. These downside scenarios are characterised by different degree of supply disruptions which are tied to how the present Middle East conflict would turn out later.

Euro Area : German’s GDP declined by 0.1% q/q (vs. consensus -0.3% q/q) and 0.3% y/y (vs. consensus -0.7%), a manifestation of monetary policy tightening impact. Still in German, inflation came in at 3.0%, the lowest annual rate since June 2021 which may explain the recent rate pause decision in the area. Meanwhile, the consumer inflation expectations index in the Euro Area decreased from 12.0 in the previous month to 11.4 in October 2023. This index reflects consumer confidence in price trends and has experienced fluctuations over the years, with an all-time high of 63.7 points in March 2022 and a record low of -8 points in August 2009.

United Kingdom : Individuals made net repayments of GBP0.9 billion on mortgage debt in September 2023, signalling a slowdown in the property market due to higher borrowing costs. This represents the largest net repayment since April. Gross lending decreased to GBP18.6 billion, while gross repayments increased to GBP19.5 billion during this period. Additionally, the 'effective' interest rate for newly drawn mortgages rose to 5.01%, and the rate on outstanding mortgages increased to 3.14%.

Australia : Retail sales rose by 0.9% m/m in September 2023, marking the third consecutive month of growth and the fastest pace since January. Department stores saw the most significant increase in sales, driven by a warmer spring, while household goods also saw substantial growth due to a new iPhone release and a rebate program in Queensland.

Malaysia : Subsidies and price controls on chicken will no longer be in place come November 1, 2023, a move that is seen in line with the approach of retargeting subsidies in phases. It was reported that the government allocated a total of RM3.8 billion in subsidies to cover the costs of chicken and eggs since February 2022.

Fixed Income

Global bonds: Treasury market started the week weaker ahead of the US Fed meeting. The 10Y UST yield rose 6 bps to settle at 4.89%. This was also after the government announced lower funding needs of USD776 billion in the final quarter of 2023, compared to the previous quarter’s borrowing of USD1.01 trillion. The announcement prompted some nervousness in the market as the focus shifted towards US growing deficit. In Europe, the Bund rallied as smaller growth contractions in Eurozone’s largest economy pared the expectations for a swift rate cut by the ECB. Data showed Germany’s GDP in 3Q2023 declined by 0.1% q/q (vs. consensus -0.3% q/q) and 0.3% (vs. consensus -0.7%) on year-on-year basis. Also, Germany’s inflation rate went down to 3.8% y/y in October from 4.5% y/y in the prior month and 4.0% market consensus.

MYR Government Bonds: MGS/GII bond markets headed off to a rather slow start to the week as the lack of any trading interest continues ahead of this week’s central banks meetings. BNM is expected to keep rates unchanged at 3% while the US Fed is also expected to keep rates unchanged at 5.25-5.50% and investors will be on the lookout for clues of whether the Fed is done hiking. Trading activities picked up slightly with buying interest seen on the belly-to-longer part of the curve after the European market opens due to series of regional European inflation figures coming below forecast. MGS/GII yields ended the day lower by 2-3 bps while USDMYR traded firmer against the greenback to close at 4.7635.

MYR Corporate Bonds: Losers were seen outpacing gainers in the PDS market with volume traded surged to MYR1.15 billion from MYR597 million last Friday. Among notable trades were MYR400 million on 01/38 PLUS done at 4.42%, MYR40 million on 02/24 Pengurusan Air SPV done at 3.70%, and MYR15 million on 02/24 UEM Sunrise Bhd done at 4.31%.

Forex

United States: An improvement in risk appetite saw USD weaken overnight. Anticipation that the Fed will not raise rates at this week’s FOMC meeting also meant a lack of support for USD. The DXY index fell 0.4% to close at 106.12.

Europe: The EUR rose as the USD fell. It’s also a busy week for EUR trading, encompassing releases of Euro zone PMI and inflation data as well as BoE policy meeting. Germany's 3Q2023 GDP contracted 0.1% q/q (expected -0.3%; last 0.1%), and down 0.3% y/y (expected -0.7%; last 0.0%). October CPI was zero m/m (expected 0.2%; last 0.3%), but up 3.8% y/y (expected 4.0%; last 4.5%).

Asia-Pacific: JPY held steady below the 150 level ahead of the busy week for global markets, which for JPY includes 2-day BoJ meeting which concludes today Meanwhile, CNY was slightly weaker on cautious mode before China holds a key domestic financial policy conference that is held twice in a decade. The meeting is expected to set medium-term measures for the financial industry. Elsewhere, AUD rose as Australia's September Retail Sales rose 0.9% m/m (expected 0.3%; last 0.3%).

MYR: The ringgit closed moderately stronger yesterday while the US dollar was slightly underperforming ahead of the FOMC meeting where Fed Funds Rates are expected to remain status quo. The USD/MYR settled the day at 4.764

Other Markets

Gold: Gold price fell 0.5% ahead of the US Fed meeting which can dictate the direction of interest rate going forward.

Crude Oil: Oil prices tumbled, erasing some gains made from the surge on Friday with Brent falling 3.3% and WTI dropping 3.8% as the worries on Middle East conflict faded.

FBM KLCI: Local bourse dipped 0.2% to 1,439 with foreign investors were the net sellers of Malaysian shares RM79.2 million outflow.

US Equities: Wall Street closed higher amidst earnings seasons. Dow Jones rose 1.6%, S&P500 climbed 1.2%, and Nasdaq gained 1.2%.

Source: AmInvest Research - 31 Oct 2023