Snapshot Summary…

Global FX: The US dollar continued to rebound, sustaining above 104

Global Rates: Bonds remained supported by weak data and outlook for rate cuts next year

MYR Bonds: The MYR bond market remain supported, aligning with global yields

USD/MYR: The ringgit weakened amid weak yuan and firm dollar

Macro News

United States : US private businesses added 103,000 jobs in November 2033, led by the services sector with notable gains in trade, transportation & utilities, education & health, and financial activities. However, there were job losses in leisure and hospitality and professional/business services. The goods sector saw a decrease, particularly in manufacturing and construction. Pay growth continued to slow, with job-stayers experiencing a 5.6% increase, the smallest since September 2021, and job-changers receiving pay gains of 8.3%, the lowest since June 2021.

Euro Area : Retail sales saw a modest 0.1% m/m increase in October 2023, ending a four-month trend of stagnant growth or declines, but falling short of the expected 0.2% rise. Consumer demand remained subdued, influenced by persistent high inflation, and elevated borrowing costs. Notably, sales of food, drinks, and tobacco experienced a 1.1% decline, the sharpest drop since March, while automotive fuel sales decreased by 0.8%. In contrast, non-food product sales grew by 0.8%, rebounding from two consecutive months of declines, and online trade surged by 2.2%.

Australia : In the 3Q2023, the Australian economy expanded by 0.2% q/q, falling short of market expectations, and decelerating from the 0.4% growth recorded in 2Q2023. This marked the slowest growth since 3Q2022, attributed to softer fixed investment growth (1.1% vs. 2.9% in Q2) and stalled household consumption. Public investment, driven by health and infrastructure projects, supported fixed investment, while household spending was impacted by reduced consumption of essential services due to government benefits and rebates.

Fixed Income

Global bonds: UST closed mixed and the negative 10Y-2Y spread rose. The market opened weak seeing that yields have touched their lowest since August. However, support for Treasuries was the ADP jobs report at a lower 103k in November and the previous month was revised down to 106k from 113k. Additional support for UST was the continued decline in crude oil prices. Meanwhile, bond yields in Europe fell. ECB member Kazaks said there’s no need for rate cuts in the first half of 2024, but he also said that he is open to changing this view.

MYR Government Bonds: It was another positive day for the local bond market and the movement was seen to align with the lower 10Y UST level, which touched a low of 4.18% level US JOLTS job data came out disappointing. The reopening of MGS 04/28 at MYR5.0 billion size fetched a strong response at BTC of 2.736x with yield averaging at 3.592%. Post tender saw MGS 04/28 yield down by another 4 bps to 3.55% as some players covered their short WI positions which were heavily done around 3.60%.

MYR Corporate Bonds: Strong performance in the PDS space yesterday and on sustained high flows. Total traded volume was MYR800 million vs. MYR768 million the day before. On the GG curves, flows were led by 09/25 Prasarana at 3.48%, down 12 bps. In the AAA segment, 01/22 PLUS saw strong flows and traded at 4.14% (-1 bp), and in the AA1 segment there was 08/35 YTLP at 4.28% (-17 bps).

Forex

United States: The dollar rose even though view for active rate cuts in 2024 persists. Though the dollar strength is largely a rebound from recent lows, with 100 bps rate cuts or more set for next year, chances of a hard landing could lessen, and may currently support the short-term dollar view.

Europe: Amid the USD strength, EUR and GBP were each down 0.3% overnight. Traders are betting that there is around 55% chance that the ECB will cut interest rates at the March meeting, with 125 basis points worth of cuts priced by the end of next year. Weak euro area retail sales numbers added to the downward move in the euro.

Asia-Pacific: China’s yuan continued to weaken but levels were supported below 7.160 (yuan dipped below this level last 21st November) as news reports suggested there continued to be CNY buying amongst large state-owned banks. This week, Moody's cut its outlook on China's sovereign ratings to negative, and traders now await China’s trade and inflation data to be released later this week. Meanwhile, the JPY also remained pressured but supported below the 147.4 level. Sentiment for the JPY seemed cautious as markets still await NFP this week. AUD was supported as Australia released 3Q2023 GDP at +2.1% y/y which beat consensus expectation of +1.8%. A day prior, the AUD fell 1.0% after RBA kept its policy rate unchanged and said there’s ‘time to assess’ impact from rate hikes.

Malaysia: MYR depreciated vs. the US dollar for a second straight day, alongside the weak CNY, and as the DXY index continued to rebound after opening this week on weak levels near 103.0.

Other Markets

Gold : Gold price rose as its demand was aided by global market’s caution before the NFP release later this week.

Crude oil: WTI crude price fell despite decline in US inventories, dropping below USD70 per barrel. An EIA report indicated US inventories fell by 4.6 million barrels last week. Also, crude fell amid caution for China’s demand on economic growth risks, especially after Moody’s downgraded the country’s rating outlook this week.

FBM KLCI: Malaysia's FBM KLCI closed lower, amid suspected profit taking activity, as well as brought down by a cautious mood before release of US and China economic data later this week.

US Equities: Major US indices all fell, mainly on profit taking activity.

Source: AmInvest Research - 7 Dec 2023