Snapshot Summary…

Global FX: DXY rebounded slightly after better retail sales data showed some resiliencies in the US economy

Global Rates: UST market weakened after as yields rose overnight, in parallel with Bunds’ and Gilts’ yield

MYR Bonds: Ringgit government bonds rallied, taking cue from the positive sentiment from UST market in the prior session

USD/MYR: MYR sharply appreciated to close below 4.70-level, amidst better performance in regional currencies

Macro News

China: China reported that the Industrial Production rose 4.6% y/y in October which is a firmer number against 4.4% forecasted and prior month's 4.5%. Boost came from the mining sector and the manufacturing sector which expanded by 2.9% and 5.1%, respectively. The October Fixed Asset Investment rose 2.9% y/y (consensus 3.1%; last 3.1%), and the October’s Retail Sales rose a strong 7.6% y/y (consensus 7.0%; last 5.5%), and the October’s Unemployment Rate remained at 5.0%, as expected.

Japan: Japan's 3Q2023 GDP showed contraction of 0.5% q/q (consensus -0.1%; last 1.1%), as well as contracting a large 2.1% y/y (consensus -0.6%; last 4.5%). with Capital Expenditure down 0.6% q/q (consensus 0.3%; last -1.0%) and GDP Private Consumption, which is more than half of the economy, was unchanged q/q (consensus 0.2%; last -0.9%). However, the September Industrial Production rose 0.5% m/m (consensus 0.2%; last -0.7%) and Capacity Utilisation was up 0.4% m/m (last 0.5%).

United States: Producer Price Index (PPI) in October was down 0.5% m/m (consensus 0.1%), which is the biggest drop since April 2020, following a downward revised +0.4%, from +0.5% in September. Core PPI excluding food and energy was unchanged m/m (consensus 0.3%) following a downward revised +0.2% from +0.3% in September. On y/y basis, total PPI was up 1.3% while core PPI rose 2.4%.

Fixed Income

Global bonds: Investors consolidated from the prior day’s gains as yields jumped overnight by the most in about a week and traders may have viewed the buying spree on Tuesday as overextended. Weak sentiment was also prompted by the smaller contraction in retail sales by 0.1% m/m compared with the forecast of 0.3% contraction. By the end of the session, yield on 10Y UST rose 8 bps to 4.53%. Sentiment in the Bund and Gilt market closely tracked that of UST market though data showed October UK’s inflation rate slowed to 4.6% y/y, beating market consensus of 4.8% y/y, alongside September’s industrial production in Eurozone which declined larger at 6.9% y/y, compared with consensus of -6.3% y/y, and previous month reading of -5.1% y/y.

MYR Government Bonds: In the local bond space, after a softer start to the week, prior day’s losses were erased as buyers emerged while tracking the global yield movement. Trading activity picked up with buying interest seen across the curve with yields easing by 3-6bps. The sharp appreciation in ringgit partly supports the gains in local bonds.

MYR Corporate Bonds: Trading volume in the PDS market improved to MYR770 million as sentiment improved, reflected also by gainers outpacing losers throughout the session. Among notable trades were MYR60 million on 05/25 Jambatan Kedua done at 3.56%, MYR130 million on 01/37 PLUS Bhd (AAA) done at 4.46%, and MYR10 million on 08/30 UOB (AA1) done at 4.00%.

Forex

United States: The dollar showed strength overnight, as retail sales, which showed smaller decline than expectations while the prior month's number was revised up to +0.9% from +0.7%. The DXY index rose 0.3%, and it is hovering near its lowest since the start of September.

Europe: The dollar showing strength overnight sent the EUR and GBP into late weakness after both currencies had shown early gains vis-a-vis the dollar. Demand for EUR and GBP was seen amid release of weak US PPI, but strong US retail sales numbers aided USD. Release of UK October CPI unchanged m/m in October against expectation of +0.1% and previous month's +0.5% also worked against the GBP. In addition, Eurozone's Industrial Production fell 1.1% m/m in September (consensus - 1.0%; last +0.6%), and falling 6.9% y/y (consensus -6.3%; last -5.1%), also was negative to the EUR.

Asia-Pacific: Positive economic data in China and cooling US inflation aided Asia’s currencies yesterday. USD/CNY dipped 0.1% to close at 7.247, despite China's PBOC aiding liquidity as it kept the interest rate unchanged when rolling over maturing medium-term policy loans. Meanwhile, there was pressure in JPY as Japan GDP showed a downside surprise, at quarterly contraction of 0.5% versus an expected - 0.1%.

Malaysia: The ringgit led gains amongst regional currencies yesterday, with USD/MYR pair falling about 1%, as sentiment was boosted after release of the US inflation number as well as China’s retail sales and industrial production beating consensus expectations.

Other Markets

Gold : Gold fell 0.2% to USD1,960 as yields and USD increased.

Crude oil : Oil prices dropped as Brent fell 1.6% to USD81 per barrel while WTI dropped 2.0% to USD77 per barrel. Data showed US crude stocks rose 3.6 million barrels last week, exceeding market expectation polled by Reuters of 1.8 million barrels rise.

FBM KLCI: The FBM KLCI rallied 1.0% to close at its intraday high of 1,466.84 and reaching an eight-month high on Wednesday. Foreign investors were the net buyers of Malaysian stocks with MYR191.9 million net inflow.

US Equities: US stocks posted another rally as Dow Jones climbed 0.5%, S&P500 rose 0.2%, and Nasdaq climbed 0.1%.

Source: AmInvest Research - 16 Nov 2023