Snapshot Summary…

Global FX: US dollar was lower overnight ahead of the US inflation data due this week

Global Rates: Sentiment was cautious ahead of release of pertinent US data

MYR Bonds: Ringgit government bonds fell last Friday but still closed the week stronger

USD/MYR: MYR weakened last Friday to pare down weekly gains vs a firm USD

Macro News

UK: Britain’s economy was flat in the July-to-September period but managed to avoid the start of a recession. The 0% GDP in 3Q2023 is vs forecast of a 0.1% contraction in a Reuters poll. In the month of September, the economy grew by 0.2% from August when growth was revised down to 0.1% from 0.2%.

Australia: Australia's central bank warned of further upside surprises to inflation following its latest hike, while also raising forecasts for economic growth and employment. the Reserve Bank of Australia (RBA), in its quarterly Statement on Monetary Policy, said its policymakers discussed holding rates at its policy meeting last week, but decided that a hike was needed to slow inflation. Last week, the RBA ended a four-month pause by raising its cash rate by 25 bps to a 12-year high of 4.35%, bringing the total increase in this cycle to 425 bps.

Fixed Income

Global bonds: On Monday, US Treasuries closed little changed and sentiment was cautious ahead of the release of US inflation data this week. Meanwhile there was little impact from Moody's downgrade of the US credit outlook to negative from stable, and Congress plan to extend government funding past 17 November. Last Friday, weakness was seen on shorter tenors but gains were on very long tenors where the 30Y fell 4 bps to close at 4.73%. The 10Y UST closed weaker as it rose 3 bps to close the week at 4.65%. There was a lack of concrete drivers to bond markets to end the week, but this ensured the overall w/w tumble, driven mainly by Fed officials’ comments that they are not discounting the possibility of more rate hikes.

MYR Government Bonds: Ringgit government bonds fell last Friday but still closed the week stronger. The 10Y MGS rose 4 bps on Friday, to close at 3.89%, but was down 9 bps w/w. Comments from Fed's Powell last Thursday when he said the Fed would not hesitate to hike interest rates in the face of inflation drove the MGS weakness. However, earlier last week, MYR bonds had shown strength, aided by decline in UST yields after the release of weak US non-farm payrolls number for October and downward revisions in August and September. Today the market holds MYR5.0 billion auction of the 3Y GII (GII maturing 09/26).

MYR Corporate Bonds: There was a lack of interest in ringgit corporate bond trading last Friday. Total volume was above MYR500 million, but bulk of trading was in a handful of papers only. These comprise AAA 10/30 Amanat Lebuhraya which fell 2 bps to 4.32%, AA1 rated 07/24 Sabah Dev down 12 bps to 4.63%, and quasi paper 05/31 Danainfra at 4.05% (+17 bps).

Forex

United States: The US dollar was lower overnight ahead of the US inflation data due to be released this week. Consensus expectation is for October to be at 0.1% m/m vs 0.4% the month before. USD closed slightly lower last Friday but sustained its gain for the week. Friday’s loss was a small -0.5% but w/w was up 0.8%.

Europe: EUR/USD and GBP/USD both gained over the weaker USD. Being that consensus expectation is for US inflation to show slower numbers especially on account of lower crude oil prices, major currencies were traded stronger in comparison against the USD. EURUSD was higher by 0.2% last Friday but still posted weekly losses, seen down 0.4% w/w amid the dollar strength. Meanwhile, GBP/USD gained 0.03% on Friday though down 1.2% w/w vs the USD. Friday's data release was UK 3Q2023 GDP at zero percent q/q but beating estimate of -0.1% q/q.

Asia-Pacific: PBoC set the CNY fixing at 7.1769 per dollar, firmer than the previous fix of 7.1771, signalling a support for the currency, but the CNY still weakened amid a cautious market ahead of this week’s expected meeting between US President Joe Biden and Chinese President Xi Jinping during the Asia-Pacific Economic Cooperation summit in San Francisco. USDJPY fell to close at 151.20 after hitting a 1-year high of 151.92 earlier in the session, with traders on the lookout whether BoJ would step in to support the JPY. Japan data showed wholesale inflation slowed to below 1% for the first time in over 2 years.

MYR: The ringgit weakened last Friday to pare down weekly gains. Friday saw USD/MYR up 0.3% but is down 0.4% w/w to close at 4.709, down from above 4.720 a week prior. The steady US dollar on hawkish tone by Fed's Powell left the ringgit weaker on Friday. This did not pare early week gains for the ringgit, which benefitted from the dollar dip after the prior week's release of the weak US jobs report.

Other Markets

Gold : Commodities were mostly higher on Monday vs the lower USD. Gold settled 0.3% higher at USD1,947/oz.

Crude oil : Oil prices rose with Brent rising 1.3%. OPEC maintained its 2024 demand forecast unchanged which include expectation of firm demand from China (demand to increase by 2.2 million bpd).

FBM KLCI: The KLCI fell 0.5% to close at 1,445 last Friday to go alongside movements in regional markets. Nevertheless, foreign investors were net buyers of MYR71 million Malaysian shares.

US Equities: Wall Street stock markets closed mixed on Monday ahead of the US data this week. Dow Jones rose 0.2%, but S&P500 dipped 0.1% while Nasdaq fell 0.2%.

Source: AmInvest Research - 14 Nov 2023