Snapshot Summary…

Global FX: US dollar demand recovered as data overnight released were mixed

Global Rates: UST curve closed mixed on Wednesday with short tenors posted more losses compared to longer tenors

MYR Bonds: MGS market traded sideways yesterday, to align with the lack of direction in the UST market from the previous session

USD/MYR: Ringgit weakened and closed the day at above 4.67-level

Macro News

United States: The 1-Year inflation expectations in the United States, as measured by the University of Michigan survey, increased to a one-year high of 4.5% in November 2023. This was higher than the preliminary estimate of 4.4% and surpassed the 4.2% recorded in the previous month. Additionally, new orders for manufactured durable goods in the United States experienced a significant decline, dropping by 5.4% m/m. This reversal followed a 4.0% surge in September and exceeded market expectations of a 3.1% decrease. The decline was largely attributed to reduced demand for transportation equipment, with orders in this category falling by 14.8%. Notably, demand for both civilian aircraft and vehicles contributed to the decline. Additionally, orders for non-defence capital goods excluding aircraft, a key indicator of business spending plans, decreased by 0.1% in October.

Euro Area: In November 2023, the consumer confidence indicator in the Euro Area increased by 0.9 points from the previous month, reaching -16.9. This marks the highest level in three months and surpasses market expectations of -17.6, reflecting a rise in consumer optimism. Consumers are hopeful that interest rates will not increase further and may even decrease as inflation shows signs of slowing down. Across the entire European Union, consumer sentiment rose by 1.1 points to -17.5.

Malaysia: Malaysia is currently engaging in negotiations for two new free trade agreements (FTAs): the Malaysia-EFTA Economic Partnership Agreement (MEEPA) and the Asean-Canada Free Trade Agreement (ACaFTA). MEEPA involves negotiations with the countries of the European Free Trade Association (EFTA), including Switzerland, Norway, Iceland, and Liechtenstein. The ACaFTA negotiation, ongoing since 2021, focuses on establishing a free trade agreement between Canada and Asean countries, including Malaysia.

Fixed Income

Global bonds: The UST market closed mixed ahead of the long US weekend. Short dated papers recorded modest losses which were balanced by small losses on the longer tenors. Declines in weekly jobless claims numbers were balanced by US durable goods orders in October by 5.4% m/m. More notable drivers were noted outside the US. These include the UK Chancellor lowering its growth forecast for 2024 to 0.7% from 1.8% while the forecast for 2025 was reduced to 1.4% from 2.5%. European Central Bank President Lagarde said that supply shocks that had boosted inflation are now subsiding.

MYR Government Bonds: The MGS market was traded sideways yesterday, to align with the lack of direction in the UST market due to a lack of meaningful drivers. The local market continues to see players looking to buy long-dated bonds for yield pickup while other players remain profit takers ahead of the year end closing.

MYR Corporate Bonds: Slightly firmer trading of corporate bonds was noted yesterday, amid the lack of momentum in the government bond market. Traded volume was about MYR800 million compared with MYR922 million the day before. Notable trades include 08/25 GENM Cap (AA1) done at 4.52% and 06/47 Tenaga (AAA) at 4.74%.

Forex

United States: Data released overnight were rather mixed, but currency traders had more reactions towards labour market and inflation expectation data. The initial jobless claims fell to 209K during the week ending 18th November from 233K in the previous week and fell short of market expectations of 225K, signalling a still tight labour market. In addition, a survey by University of Michigan showed inflation expectations for oneyear ahead ticked higher to 4.5%. By the end of the session, the DXY index rose 0.3%. The US market will be closed today due to Thanksgiving holiday.

Europe: The EUR/USD pair was down 0.2% to 1.089. Bundesbank President Joachim Nagel said that the ECB is near its peak policy rate but will not rule out another hike. The Cable currency, GBP/USD, posted 0.4% lower to close at 1.249. UK Chancellor Jeremy Hunt delivered his Autumn Statement along with more fiscal giveaways including a cut to employee National Insurance premium, a freeze on alcohol duty, additional tax breaks, and a rise in the minimum wage.

Asia-Pacific: Stronger USD sent the JPY to near 150-level, weakening for the first time in five days. This is also ahead of Thanksgiving holiday in Japan today as well. Japan’s Prime Minister Fumio Kishida addressed in front of Parliament saying that the BoJ’s monetary policy is not aimed at guiding foreign exchange rates in certain way. In the meantime, the yuan weakened 0.3% to close Wednesday at 7.165 after six days of firming trend. This is despite the PBoC continues to set yuan at stronger footing at 7.1254 vs. Bloomberg survey average estimate of 7.1432.

Malaysia: Ringgit weakened 0.4%, erasing gains made in the previous session, to close at 4.677. The currency was traded within the range of 4.656 and 4.682. The BNM’s international reserves amounted to USD110.5 billion as at 15th November, higher than as at end October 2023 of USD108.5 billion. The amount is sufficient to cover 5.3 months of imports of goods and services.

Other Markets

Gold : Gold prices fell 0.4% to USD1,990/oz as the US dollar and yields rose.

Crude oil: Oil prices fell with Brent falling 0.6% and WTI falling 0.9% amidst a volatile trading day as OPEC+ producers unexpectedly delayed a meeting on production cuts.

FBM KLCI: The local bourse’s KLCI shed 0.5% to 1,456 with both foreign investors and local retailers were the net buyers of Malaysian stocks at MYR36.6 million and MYR24.6 million.

US Equities: Wall Street closed higher ahead of Thanksgiving holiday. The Dow Jones and Nasdaq both gained 0.5% while S&P500 climbed 0.4%.

Source: AmInvest Research - 23 Nov 2023