Snapshot Summary…

Global FX: The dollar index started the week on a better note. This week’s Fed speeches will be in focus to gauge its policy stance

Global Rates: US Treasuries posted losses due to profit taking activity

MYR Bonds: MGS market rallied further yesterday with heavy volume traded on benchmark papers

USD/MYR: The ringgit strengthened sharply and broken the 4.65-level

Macro News

Euro Area: Eurozone's October Services PMI stood at 47.8, in line with expectations. However, the latest data shows a decline from 48.7 in September, indicating the Euro economy may have started on weak footing in 4Q2023. Eurozone GDP contracted by 0.1% in 3Q2023.

Indonesia: Indonesia’s economy grew 4.94% y/y during the third quarter of 2023, softer than market consensus of 5.05% and lower than 5.17% in the previous quarter, as household consumption and commodity prices are easing while government spending and exports have declined. The growth was supported by continued expansions in fixed investments.

United Kingdom : The S&P Global/CIPS Construction PMI for UK improved slightly to 45.6 in October from 45.0 in the prior month (consensus: 46.0). Nonetheless, it was the second-lowest reading since May 2020, indicating a sharp decline in construction activity amidst elevated interest rate environment.

Fixed Income

Global bonds: US Treasuries posted losses with the 2Y yield climbed 10 bps to 4.93% and the 10Y rose 7 bps to 4.64%. Losses came after recent rallies which saw yields coming down by 12 bps and 25 bps respectively on the 2Y and 10Y papers. Amid a better appetite in global risk markets, Treasuries fell due to profit taking activity. Releases of PMI services data in Europe, showing continued contraction, did not alter weakness in bonds, which include 10Y gilts and bunds both rising 9 bps overnight. Data includes Eurozone's October Services PMI at 47.8, and the November Sentix Investor Confidence improving to -18.6 from -21.9. Germany's September Factory Orders rose 0.2% m/m (August: 1.9%) and the October Services PMI fell to 48.2 from 50.3.

MYR Government Bonds: MGS market rallied further yesterday with heavy volume traded on benchmark papers. We saw the 3Y MGS shed 6 bps to close at 3.55% on nearly MYR550 million trading volume. The 10Y MGS fell 8 bps to close at 3.90%. There is an auction of GII 05/52 today at MYR3.0 billion tender size with additional MYR2.0 billion private placement. There's also scheduled release of Malaysia's industrial production data for September. Consensus is for a smaller 0.1% contraction vs -0.3% prior month.

MYR Corporate Bonds: Mixed performance was seen in the PDS market on Monday as traders were wary after the recent firm risk appetite. Traded volume was MYR438 million compared with MYR394 last Friday. Papers which posted gains were slanted on higher grade papers, including 10Y tenor 01/33 and 09/33 Danga (AAA) each closing at 4.27%. Also, 10/29 PASB was firm at 4.22%, down 4 bps.

Forex

United States: The USD found some support after the recent drop. Investors shifted their focus back towards the FFR rate outlook as this week’s Fed speeches by multiple officials including Fed Chair Jerome Powell.

Europe: The EUR fell 0.1% to settle at 1.072. Further pressuring the common currency is the final data for Eurozone’s Composite PMI at 46.5 for October, in line with initial estimate but lower than previous month’s 47.2, highlighting the deterioration in private businesses activity in the region. At the same time, the GBP shed 0.3%, weighed by the rising expectations for rate cut by the BoE in 2024. The central bank’s Chief Economist Huw Pill said that the pricing in financial markets which is pointing towards first rate cut in August 2024, “does not seem totally unreasonable”.

Asia-Pacific: The CNY firmed 0.1% to close at 7.270 on Monday, hitting its strongest level since mid-September 2023 as yuan’s fixing was 1,088 pips firmer than Reuters estimate of 7.2868. China’s economic data this week will continue to be under scrutiny to gauge further signals with regards to the conditions of the economy. This will include October’s annual inflation rate due this Thursday where the market is expecting it to decline by 0.1%. On the other hand, the USD/JPY pair rebounded 0.5% to 150.07, after it closed below 150-level last Friday due to the lower USD. The currency also weighed by BoJ Governor Kazuo Ueda’s remarks said that the county was making progress towards achieving the bank’s 2.0% target but not enough to exit ultra-loose policy just yet further reiterating the need for negative rate policy.

MYR: The ringgit started the week on stronger to settle at 4.643, taking cue from the lower dollar in the previous Friday after NFP and unemployment rate data suggest the US Fed may already done with its rate hike cycle. What left is for the restrictive monetary policy to work its way to the real economy and bring inflation to the target without sacrificing growth too much.

Other Markets

Gold: As focus on interest rate outlook has returned in the market, gold prices fell 0.7% to USD1,978/oz.

Crude Oil: Oil prices inched higher following Saudi Arabia and Russia indorsed their commitments in extra voluntary oil supply cuts until the end of the year. Brent gained 0.3% while WTI climbed 0.4%.

FBM KLCI: Bursa Malaysia gained 0.1% to 1,465, driven by net foreign buying of MYR359.3 million inflow.

US Equities: Wall Street rallied across the board with Dow Jones rising 0.1%, S&P500 climbing 0.2% and Nasdaq gaining 0.3%.

Source: AmInvest Research - 7 Nov 2023